EPA/600/R-99/100 

April 2001 

Cost Evaluation Strategies for 

Technologies Tested Under the 

Environmental Technology Verification 

Program

by

Arun Gavaskar

Lydia Cumming

Battelle

Columbus, OH 43201-2693

Contract No. 68-C7-0008

Work Assignment No. 3-16

for

Project Officer, George Moore

Work Assignment Manager, Richard Scharp

NATIONAL RISK MANAGEMENT RESEARCH LABORATORY

OFFICE OF RESEARCH AND DEVELOPMENT

U.S. ENVIRONMENTAL PROTECTION AGENCY

CINCINNATI, OH 45268

ET ET ET 

Printed on Recycled Paper 
Notice 

The U.S. Environmental Protection Agency through its Office of Research and 

Development funded the research described here under Contract No. 68-C7­

0008, Work Assignment No. 3-16. The work was supported under the U.S. 

EPA Environmental Technology Verification (ETV) Program. This cost evaluation strategy report has been subjected to U.S. EPA’s peer and administrative 

review, and has been approved for publication as an U.S. EPA document. 

In no event shall either the United States Government or Battelle have any 

responsibility or liability for any consequences of any use, misuse, inability to 

use, or reliance on the information contained herein, nor does either warrant or 

otherwise represent in any way the accuracy, adequacy, efficacy, or applicability of the contents hereof. Mention of corporation names, trade names, or 

commercial products does not constitute endorsement or recommendation for 

use of specific products. 

ii 
Foreword 

The U.S. Environmental Protection Agency is charged by Congress with protecting the Nation’s land, air, and water resources. Under a mandate of national 

environmental laws, the Agency strives to formulate and implement actions 

leading to a compatible balance between human activities and the ability of 

natural systems to support and nurture life. To meet this mandate, EPA’s 

research program is providing data and technical support for solving environmental problems today and building a science knowledge base necessary to 

manage our ecological resources wisely, understand how pollutants affect our 

health, and prevent or reduce environmental risks in the future. 

The National Risk Management Research Laboratory (NRMRL) is the Agency’s 

center for investigation of technological and management approaches for preventing and reducing risks from pollution that threaten human health and the 

environment. The focus of the Laboratory’s research program is on methods 

and their cost-effectiveness for prevention and control of pollution to air, land, 

water, and subsurface resources: protection of water quality in public water 

systems; remediation of contaminated sites, sediments, and ground water; and 

prevention and control of indoor air pollution; and restoration of ecosystems. 

NRMRL collaborates with both public and private sector partners to foster technologies that reduce the cost of compliance and to anticipate emerging problems. NRMRL’s research provides solutions to environmental problems by: 

developing and promoting technologies that protect and improve the environment; advancing scientific and engineering information to support regulatory 

and policy decisions; and providing the technical support and information transfer to ensure implementation of environmental regulations and strategies at the 

national, state, and community levels. 

This publication has been produced as part of the Laboratory’s strategic longterm research plan. It is published and made available by EPA’s Office of Research and Development to assist the user community and to link researchers 

with their clients. 

E. Timothy Oppelt, Director 

National Risk Management Research Laboratory 

iii 
Abstract 

The objective of this document is to provide a general set of guidelines that 

may be consistently applied for collecting, evaluating, and reporting the costs of 

technologies tested under the Environmental Technology Verification (ETV) 

Program. Because of the diverse nature of the technologies and industries 

covered in this program, each ETV pilot has the flexibility for any of the following options to be used: 

• No cost evaluation 

• Itemization of costs 

• Estimation of capital investment and operation and maintenance 

(O&M) costs 

• Calculation of total annualized cost, simple payback period, or 

present value.

The four cost options are incremental; each successive option builds on and 

incorporates all of the elements of the previous options to provide a comprehensive cost evaluation. 

One option for pilots with limited resources or other restrictions is to not evaluate 

costs. In the second option, all cost items are identified and quantified, without 

assigning monetary (dollar) values. The cost items are reported in two categories, capital investment and operation and maintenance (O&M) costs. 

In the third option, the cost evaluation process is taken one step further. All the 

capital and O&M items are identified, quantified, and assigned dollar values. In 

the fourth option, the total impact of the technology on the user is calculated. 

The fourth option also facilitates the comparison of the ETV technology with a 

baseline or competing technology. Assessing the total impact of a technology 

typically involves the calculation of either total annualized cost, simple payback 

period, or present value. 

A comprehensive reporting format, which includes cost evaluation objectives 

and data collection methods, estimates of capital investment and O&M costs, 

cost analysis, list of assumptions, technical factors affecting costs, and intangible benefits and/or disadvantages of the technology, is recommended. 

iv 
Contents 

Foreword .................................................................................................................iii

Abstract ...................................................................................................................iv

Figure ..................................................................................................................... vii

Tables..................................................................................................................... vii

Acronyms and Abbreviations.................................................................................. viii

1. Introduction ......................................................................................................... 1

1.1 ETV Program Description ............................................................................ 1

1.2 Cost Evaluation Strategy ............................................................................. 2

1.3 Summary of Cost Evaluation Options........................................................... 2

1.3.1 No Cost Evaluation ........................................................................ 3

1.3.2 Itemization of Costs........................................................................ 4

1.3.3 Estimation of Capital Investment and O&M Costs........................... 4

1.3.4 Calculation of Total Annualized Cost, Simple Payback 

Period, or Present Value................................................................ 4

1.4 Quality Assurance/Quality Control ............................................................... 4

1.5 Reference.................................................................................................... 4

2. Itemization of Costs............................................................................................. 5

2.1 Identifying the Cost Evaluation Objective and Data Collection 

Methods ...................................................................................................... 5

2.2 Determining the Design Basis...................................................................... 5

2.3 Identifying and Quantifying Capital Investment and O&M Costs ................... 6

2.3.1 Identifying and Quantifying Capital Items........................................ 6

2.3.1.1 Site Preparation .............................................................. 7

2.3.1.2 Buildings and Land.......................................................... 7

2.3.1.3 Purchased Equipment ..................................................... 7

2.3.1.4 Utility Connections/Systems ............................................ 8

2.3.1.5 Installation....................................................................... 8

2.3.1.6 Startup/Training............................................................... 8

2.3.1.7 Regulatory Issues/Permitting........................................... 8

2.3.1.8 Other............................................................................... 8

2.3.2 Identifying and Quantifying O&M Items........................................... 8

2.3.2.1 Materials ......................................................................... 8

2.3.2.2 Utilities ............................................................................ 8

2.3.2.3 Labor .............................................................................. 8

2.3.2.4 Maintenance ................................................................... 8

2.3.2.5 Waste Management ........................................................ 8

2.3.2.6 Regulatory Compliance ................................................... 8

2.3.2.7 Other............................................................................... 8

2.4 Listing the Assumptions Involved in a Cost Evaluation ................................. 8

2.5 Listing the Technical Factors that Impact Costs ........................................... 9

v 
2.6 Listing the Intangible Benefits and/or Disadvantages 

of a Technology......................................................................................... 10

2.7 Preparing a Cost Evaluation Report........................................................... 10

3. Estimation of Capital Investment and O&M Costs.............................................. 11

3.1 Estimating Capital Investment.................................................................... 11

3.2 Estimating O&M Costs............................................................................... 11

3.3 Additional Considerations in Estimating Capital Investment 

and O&M Costs ......................................................................................... 11

3.4 Listing the Assumptions............................................................................. 13

3.5 Listing the Technical Factors that Impact Costs ......................................... 13

3.6 Listing the Intangible Benefits/ Disadvantages of a Technology.................. 13

3.7 Preparing a Cost Evaluation Report........................................................... 13

3.8 Reference.................................................................................................. 13

4. Calculation of Total Annualized Cost, Simple Payback Period, 

or Present Value ............................................................................................... 14

4.1 Calculating the Total Annualized Cost........................................................ 14

4.2 Calculating the Simple Payback Period...................................................... 14

4.3 Calculating the Present Value of a Technology .......................................... 15

4.4 Comparing Two Technologies ................................................................... 16

4.5 Preparing a Cost Evaluation Report........................................................... 17

Appendices 

Appendix A: Illustration of Capital Investment/O&M Cost Estimation and 

Total Annualized Cost Analysis of a Dual-Stage Filtration 

System in a Drinking Water Plant....................................................... 18

Appendix B: Illustration of Capital Investment/O&M Cost Estimation and 

Simple Payback Period Analysis of an Electrodialysis 

System .............................................................................................. 21

Appendix C: Illustration of Capital Investment/O&M Cost Estimation and 

Present Value Calculation for an Energy-Efficient Water 

Heater ............................................................................................... 25

Appendix D: Cost Evaluation References............................................................... 28

Appendix E: Time Value of Money Table ............................................................... 30

Appendix F: Unit Annualized Cost ......................................................................... 32

vi 
Figure 

Figure 1-1. Summary of Cost Evaluation Methodology for ETV 

Technologies ....................................................................................... 3

Tables 

Table 1-1. U.S. EPA Project Officers, ETV Partners, and ETV Partner 

Contacts for Each ETV Pilot................................................................. 1

Table 2-1. List of Capital Items ............................................................................. 7

Table 2-2. List of O&M Items ................................................................................ 7

Table 2-3. List of Intangible Benefits/Disadvantages........................................... 10

Table 3-1. Capital Investment for a Hypothetical Water Treatment Unit............... 11

Table 3-2. Annual O&M Costs for a Hypothetical Nickel Recovery 

System .............................................................................................. 12

vii 
Acronyms and Abbreviations 

BTU British thermal units 

DOE Department of Energy 

DSF dual-stage pressure filtration 

ECHOS Environmental Cost Handling Options and Solutions 

ETV Environmental Technology Verification 

EvTEC Environmental Technology Evaluation Center 

FCI fixed capital investment 

gpm gallons per minute 

kWh kilowatt-hours 

NRMRL National Risk Management Research Laboratory 

NTU nephelometric turbidity unit(s) 

O&M operation and maintenance 

ORD Office of Research and Development 

PV present value 

QA quality assurance 

QA/QC quality assurance/quality control 

U.S. EPA United States Environmental Protection Agency 

viii 
Acknowledgments 

This document was prepared under the direction of George Moore, project officer, National Risk Management Research Laboratory (NRMRL) in Cincinnati, 

Ohio; and Richard Scharp, Work Assignment Manager (WAM), NRMRL. The 

authors would like to acknowledge the special efforts of John Abraham, 

NRMRL; Jeff Adams, NRMRL; and Lauren Drees, NRMRL, who provided considerable help in reviewing the document and providing guidance and technical 

support. Special acknowledgment is given to the ETV pilot managers, who 

provided comments and suggestions during the creation of this document. 

The authors appreciate the contribution of Penelope Hansen, ETV Program 

Director, for recognizing and supporting the need for a uniform cost evaluation 

strategy for assessment of ETV technologies. 

ix 

1. Introduction 

This document contains the general methodology for 

estimating application costs for technologies tested 

under the United States Environmental Protection Agency’s (U.S. EPA’s) Environmental Technology Verification 

(ETV) Program. 

1.1 ETV Program Description 

The U.S. EPA’s Office of Research and Development 

(ORD) initiated the ETV Program in 1994. The ETV Program is designed to accelerate the development and use 

of environmentally friendly technologies through objective verification and reporting of technology performance. 

The goal of the program is to provide potential purchasers and regulators with an independent and credible 

assessment of what they are buying and permitting. The 

ETV Program is implemented through 12 pilot programs. 

These pilots are in various stages of development, and 

each pilot program (commonly referred to by ETV participants as a “pilot”) focuses on a specific environmental 

area of interest. (The only exception is the Environmental Technology Evaluation Center [EvTEC] pilot, which is 

independent and does not focus on a specific area of 

interest.) 

Table 1-1 lists the various pilots, U.S. EPA project officers, ETV partners, and ETV partner managers and 

contacts. The U.S. EPA is responsible for auditing and 

oversight of these partner organizations, as appropriate, 

to ensure the credibility of the verification process and 

data. The ETV partners are responsible for evaluating 

the performance of the vendors’ technologies based on 

testing and quality assurance (QA) protocols developed 

with input from stakeholders. Stakeholders consist of 

representatives of all verification customer groups: buyers and users of technology, developers and vendors, 

Table 1-1. U.S. EPA Project Officers, ETV Partners, and ETV Partner Contacts for Each ETV Pilot 

ETV Pilot U.S. EPA Project Officer ETV Partner ETV Partner Contacts 

Drinking Water Systems Jeff Adams NSF International Bruce Bartley 

Site Characterization and Monitoring Eric Koglin Oak Ridge National Laboratory Roger Jenkins 

Amy Dindal 

Sandia National Laboratory Wayne Einfeld 

EvTEC Norma Lewis Civil Engineering William Kirksey 

Research Foundation 

Pollution Prevention: Mike Kosusko Concurrent Technologies Brian Schweitzer 

Coatings and Equipment Vikki Miller 

Indoor Air Products Les Sparks Research Triangle Institute David Ensor 

Debbie Franke 

Pollution Prevention: Norma Lewis California Environmental Greg Williams 

 Waste Treatment Protection Agency Tony Luan 

Air Pollution Control Technologies Ted Brna Research Triangle Institute Jack Farmer 

Global Climate Change Technologies Dave Kirchgessner Southern Research Institute Stephen Piccot 

Advanced Monitoring Systems Robert Fuerst Battelle Karen Riggs 

Metal Plating/Finishing Alva Daniels Concurrent Technologies Jim Voytko 

Wet Weather Flow Mary Stinson NSF International John Schenk 

Source Water Protection Ray Frederick NSF International Tom Stevens 

1
consultants, and state regulators. For some pilots, the 

partner’s facilities are utilized for technology testing, but 

testing is more commonly conducted at other testing 

facilities or demonstration sites. 

1.2 Cost Evaluation Strategy 

An ETV pilot’s verification of the technical performance 

of a technology is likely to be fairly definitive. However, 

technology cost estimates are expected to incorporate 

more variability and uncertainty than technical performance evaluations, so it is useful to clearly differentiate 

the terms “cost verification” and “cost estimation.” 

Cost verification is a process that involves firsthand experience of the cost elements required by the ETV pilot 

during the verification project. Thus, the verification process actually measures individual cost items, such as 

labor (time of operation and labor rate), energy, and 

materials. Measuring various cost items may present 

different degrees of difficulty based on the length and 

comprehensiveness of the testing. If the objective is to 

test the technology in the ETV partner’s facility, as some 

pilots do, then an effort to verify some cost items (such 

as installation, operating labor, and operating energy) 

could be made for some types of technologies. Firsthand verification of other cost items (such as maintenance) is more difficult if the verification process takes 

place over a short period. This is not to diminish the 

value of testing technologies in a partner’s facility, because considerable information on the technical performance and certain cost items (such as operating labor and 

energy requirements) can be obtained from a simulated 

test in a partner’s facility. However, direct verification of 

an item such as maintenance cost would require that a 

unit be installed in a user’s facility for a period of one 

year or longer, or for the expected life of the technology. 

Cost estimation, on the other hand, is a process that 

involves a combination of direct verification, engineering 

judgment by persons knowledgeable with the technology and its application, and previous experience with 

similar technologies by the ETV partners or vendors. 

Given the limitations of the ETV Program’s verification 

process, directly verifying every cost item for all the technologies in all the pilots is not feasible. In fact, the number of cost items that were directly measured or verified 

has been limited in every other technology evaluation 

program. Ultimately, although the ETV Program directly 

verifies the technical performance of a technology under 

specified conditions, addressing costs probably will be a 

process of cost estimation rather than cost verification. 

1.3 Summary of Cost Evaluation Options 

After technical performance of a technology, cost is the 

most important factor that guides decision-making by 

potential users. Cost information is especially useful for 

technologies targeted toward small businesses, because 

such users are less likely to have the resources to evaluate technology costs. The ETV Program allows each pilot 

manager (ETV partners in collaboration with the U.S. 

EPA project officers) the flexibility to select a cost evaluation approach that best fits the resources and needs of 

the pilot, as well as the type of technology and its application. This document describes four different cost evaluation options that an ETV pilot manager could use: 

• No cost evaluation (see Section 1.3.1) 

• Itemization of costs (see Section 2) 

• Estimation of capital investment and operation 

and maintenance (O&M) costs (see Section 3)

• Calculation of total annualized cost, simple 

payback period, or present value (see Section 4). 

When using this document, ETV pilot managers decide 

either to not address costs, to address costs in a limited 

fashion, or to conduct a relatively comprehensive cost 

estimation and analysis. Stakeholder input also is taken 

into consideration when making this decision. Pilot managers wishing only to itemize relevant costs need not 

consider Sections 3 or 4 of this document. Also, each 

successive option mentioned in this list builds on the previous one, so that the fourth option (Calculation of Total 

Annualized Cost, Simple Payback Period, or Present 

Value) builds on and incorporates all the elements of the 

previous three on the list to provide a comprehensive 

cost evaluation. Appendices A through C contain illustrations of cost evaluation for three technologies. 

These four options were first described in the earlier review document Options for Collecting, Evaluating, and 

Reporting ETV Technology Costs (Battelle, 1998). The 

review showed that at least one of the technologies 

tested so far under the ETV Program had been evaluated under the relatively comprehensive fourth option 

(Calculation of Total Annualized Cost, Simple Payback 

Period, or Present Value). 

This document includes a standard cost reporting format 

that pilot managers can use in two ways: (1) In the planning stages of an ETV technology verification test, pilot 

managers could use this standard format as a checklist 

to ensure that all the required items for the cost evaluation will be tracked during testing. (2) Upon completion 

of the ETV technology verification test, the standard format could be used to ensure that all relevant items are 

presented and that potential users can use the reported 

costs to evaluate their own application or to compare 

competing technologies. Figure 1-1 shows how these 

options progressively lead to a comprehensive cost 

evaluation. 

2
Define Cost 

Objectives and 

Data Collection 

Methods 

Determine the 

Design Basis 

Identify and 

Quantify 

Capital Items 

Identify and 

Quantify 

Operation and 

Maintenance Items 

List the Assumptions 

Used in Cost Analysis 

List the Key 

Technical Factors 

Impacting Costs 

List the Intangible 

Benefits and/or 

Disadvantages of 

the Technology 

Estimate Capital 

Investment 

Estimate Operation 

and Maintenance 

Costs

 Calculate Total 

Annualized Cost, 

Simple Payback Period, 

or Present Value

Figure 1-1. Summary of Cost Evaluation Methodology for ETV Technologies 

ETV technologies are diverse enough that not all cost 1.3.1 No Cost Evaluation 

elements described in this document are appropriate for 

every technology. Therefore, cost tables and reporting One option that pilot managers may use is to not evalu­ formats are presented in this document as examples of ate costs. Reasons why pilots may not address costs elements to consider when performing a cost eval- include difficulty or inability in obtaining the required cost uation, and are not designed to be comprehensive for all items, lack of vendor or user interest in cost evaluation, pilots and/or technologies. In general, though, pilot man- or simply a wish to conserve limited financial resources agers should include in their evaluations as much rele- for evaluating the technical performance of a technol­ vant cost data as possible, as well as a description of ogy. The rest of this document does not apply to pilots the cost data not included in the evaluation. for which the No Cost Evaluation option is exercised. 

3
1.3.2 Itemization of Costs 

Section 2 of this document is suitable for pilot managers 

who want to perform a limited cost evaluation. In this option, the various cost items that may be applicable to the 

technology are identified and quantified, but monetary 

(dollar) values are not assigned. This option is suitable 

for pilot managers who may find it difficult to assign unit 

costs (or prices) for each cost item, either because the 

unit costs are likely to be highly variable from user to 

user in the affected industry or because the unit costs 

are not easily available. 

1.3.3 Estimation of Capital Investment 

and O&M Costs 

Section 3 describes the Estimation of Capital Investment and O&M Costs option, which builds on the Itemization of Costs option. In addition to identifying and 

quantifying the cost items associated with the ETV technology, unit costs (prices) are assigned for each item. 

Based on the quantity and unit cost of each item, the 

total cost of each item can be estimated. 

1.3.4 Calculation of Total Annualized Cost, 

Simple Payback Period, 

or Present Value 

Section 4 describes the Calculation of Total Annualized 

Cost, Simple Payback Period, or Present Value option, 

and is suitable for pilot managers who want to perform a 

more detailed cost evaluation of a technology. In this 

option, the total impact of an ETV technology on a 

potential user is assessed. This option also facilitates 

the comparison of the ETV technology with a baseline 

or competing technology. Assessing the total impact of 

a technology typically involves the calculation of a total 

annualized cost, simple payback period, or present 

value. This option builds on the Estimation of Capital 

Investment and O&M Costs approach, and is the most 

comprehensive of the cost evaluation options described 

in this document. 

1.4 Quality Assurance/Quality Control 

The quality assurance/quality control (QA/QC) activities 

associated with the data collection for cost evaluation 

are similar to those associated with data collection for 

technology verification purposes. If cost evaluation is 

desired, it should be identified as an objective in the 

project planning document. The data that need to be 

collected should be identified, along with the required 

source (if appropriate) and/or procedures used to collect 

the data. Depending on the needs of the project, any 

QA/QC requirements for the procedures used to collect 

the cost-related data also should be specified in the 

planning document. 

The option used for cost evaluation also should be documented in the project report. The source of any data/ 

information used in cost evaluation should be identified, 

and any assumptions used in estimating costs should 

be discussed. Also, any deviations from QA/QC requirements for measurements used to estimate costs should 

be discussed, along with the effect on cost evaluation 

results. 

1.5 Reference 

Battelle. 1998. Options for Collecting, Evaluating, and 

Reporting ETV Technology Costs. Prepared for U.S. 

EPA’s National Risk Management Research Laboratory, 

Cincinnati, OH. June. 

4
2. Itemization of Costs 

Costs are incurred when resources (capital) are invested and resources (inputs) are consumed to generate products (outputs). Depending on the industry, the 

product or output could be treated water effluent from a 

wastewater treatment plant, recycled solvent from a 

machine shop, a new environmentally friendly surface 

coating that replaces a conventional chromium coating, 

or the numerical result from the analysis of a soil sample. Inputs required to generate the product may include 

labor, materials, and/or energy. The Itemization of Costs 

option outlines a systematic way of identifying and 

quantifying these resources, without necessarily assigning monetary (dollar) amounts to them. 

2.1 Identifying the Cost 

Evaluation Objective and 

Data Collection Methods 

The cost evaluation objective functions to help a potential user decide whether to buy or not buy an ETV technology. The three types of cost evaluation objectives 

are: 

• To estimate and compare the cost of the ETV 

technology to a “baseline” technology

• To estimate and compare the cost of the ETV 

technology to a “competing” technology

• To estimate the cost of an “add-on” ETV 

technology.

Often, a buy/no-buy decision on an ETV technology is 

based on a comparison of the cost of that technology 

with a baseline or competing technology. A baseline technology is one that is currently being applied by the user, 

and serves as the basis of comparison with the ETV 

technology. A competing technology is one that is available commercially and performs the same function as 

the ETV technology, but is not the baseline technology 

currently installed in the user’s facility. The only case 

where a comparison between technologies may not be 

possible is when the ETV technology is an add-on (no 

replacement of a baseline technology is involved) and 

no competing technology is available to fulfill the 

technical objectives of the user. Before characterizing 

an ETV technology as an add-on, pilot managers should 

carefully consider whether or not a baseline technology 

or operation is being replaced. For example, a small 

coolant recycling unit may be “added on” to a metalworking plant. Although no existing equipment is being 

replaced, the new technology (on-site coolant recycling) 

is replacing a baseline technology (off-site coolant disposal). The net impact of adding the recycling unit can 

be determined only by comparing its cost to the cost of 

the baseline technology, and the resulting impact could 

be a net saving or a net cost. 

It is important to identify the cost evaluation objective 

early in the ETV process so that the relevant cost items 

can be tracked during a verification test (see Section 2.6 

for a discussion of relevant cost items). For many ETV 

technologies, this may involve tracking or estimating the 

costs of both ETV and baseline/competing technologies. 

The data collection methods used to achieve the cost 

evaluation objective also should be identified in the 

planning stages and mentioned in the cost report. Many 

of the required cost data can be obtained by direct measurement during a verification test. However, it may not 

be possible to quantify all cost items through direct measurement. For example, the labor required to operate an 

ion exchange unit may be observed and measured during a one-week ETV test and extrapolated to one year 

of operation in a relatively straightforward fashion. On 

the other hand, the maintenance cost item may be 

difficult to measure directly during a one-week test. The 

quantities and costs of such items may have to be 

determined based on the engineering judgment of pilot 

managers or based on the experience of the vendor 

with previous applications. 

2.2 Determining the Design Basis 

The design basis refers to the performance specifications and equipment design requirements of the ETV 

5
technology. The performance specifications for a technology may include the desired product features, as well 

as features of the inputs, equipment, and operations involved. For example, a wastewater treatment plant may 

require that a technology be able to treat 1,000 gal/day 

of wastewater and meet an effluent target of no more 

than 1 mg/L of chromium. These requirements of product quantity and quality are part of the design basis for 

the technology. In addition, the plant also may require 

that the technology be able to handle wastewater with a 

pH of 3 and containing up to 2,000 mg/L of total dissolved solids. This limitation on the feed or input quality 

is also part of the design basis because it may impact 

the materials of construction used in the equipment and 

therefore the unit cost (price) of the equipment. It is 

important to identify the design basis at the beginning of 

the cost evaluation exercise, because once the design 

basis is established, the quantity and unit cost (price) of 

each individual item (e.g., equipment, labor, maintenance, etc.) of the technology application can be calibrated to this basis. 

An important aspect of the design basis for cost evaluation is the throughput requirement of a technology. 

Throughput is the quantity of material processed 

through or produced by the ETV or baseline/competing 

technology in a specified period (usually, one year) of 

operation. Throughput can be measured in terms of the 

input (e.g., gallons of wastewater treated per year) or 

output (e.g., annual hot water usage with a new energyefficient water heater) related to a technology. Although 

throughput can be measured for any period, the common practice is to determine throughput on an annual 

basis. 

Note that the throughput generally is based on the expected requirement of a user of the ETV technology. 

Therefore, throughput may be different from the capacity of the equipment associated with the technology. 

Equipment capacity is the maximum throughput that is 

possible given the size of the equipment available or 

selected. The design throughput may be set at a value 

equal to or less than the capacity of the ETV technology 

equipment. If the design throughput is assigned to be 

equal to the capacity of the primary ETV technology 

equipment, it is essential that all associated equipment 

(i.e., pumps, piping, and valves) be designed to handle 

the same (or greater) capacity. 

Because the actual throughput is likely to vary from user 

to user, the cost report should specify the design 

throughput used as the basis for developing estimates 

of both the quantities and costs of the individual cost 

items and the overall cost of the technology. 

2.3 Identifying and Quantifying 

Capital Investment and O&M Costs 

One distinction that is important to understand for cost 

evaluation is the difference between capital investment 

and O&M costs. Capital investment refers to the initial 

outlay of money required to acquire and install the technology in a user’s facility. It includes all the costs 

incurred up to the point that the technology is ready to 

perform its desired function in the user’s facility. Examples of capital items are purchased equipment, installation, and training associated with the ETV technology. 

O&M costs are the recurring costs associated with the 

continued operation of the technology. Examples of 

O&M costs are operating labor, materials, and energy. 

Although O&M costs can be estimated for any time 

period, this document generally recommends estimating 

them on an annual basis. 

Tables 2-1 and 2-2 show the main categories of capital 

items and O&M items, respectively, that are likely to be 

associated with an ETV technology. Not all the items will 

be applicable to all the technologies. These tables are 

designed to serve as checklists so a pilot manager can 

ensure that common capital and O&M items are not 

missed during the cost evaluation. Following subsections 

of this document describe these cost items in more detail. 

2.3.1 Identifying and Quantifying 

Capital Items 

Table 2-1 lists the common categories of capital items 

likely to be encountered for an ETV technology. Not all 

items will be applicable to all technologies. The quantity 

of each capital item is determined by the design basis of 

the user. For example, a user who wants to use a new 

ultrafiltration unit for one shift per day may need to train 

only one operator. On the other hand, another user who 

wants to use the unit continuously over three shifts per 

day may need to train three operators. Thus the quantity 

of training (one 8-hr day versus three 8-hr days of labor) 

and the associated training cost for the technology will 

be determined by the operating requirements of the 

user. Similarly, a user who has an annual throughput 

requirement of 80,000 gal of wastewater per year may 

buy an ultrafiltration unit with a rated capacity of 

100,000 gal/yr (assuming that this is the next largest 

size of equipment available). Another user with a requirement of 180,000 gal/yr may opt for the next largest 

size of unit, rated at 200,000 gal/yr, or may buy two 

100,000-gal/yr rated units. The design basis for the cost 

evaluation should be clearly stated in the ETV cost report. 

6
Table 2-1. List of Capital Items 

Site Preparation 

� In-house (labor, materials) 

� Demolition/clearing, grading/landscaping 

� Old equipment/rubbish disposal 

� Equipment rental 

� Vendor/contractor services, including fees 

Buildings and Land 

� Equipment housing 

� Plant expansion 

Purchased Equipment 

� Primary equipment 

� Associated equipment (storage and materials 

handling equipment) 

� Monitoring/control equipment 

� Laboratory/analytical equipment 

� Safety/protective equipment 

� Freight/shipping and handling 

� Licensing and/or warranty 

Utility Connections/Systems 

� Energy (electricity, fuel) 

� Steam 

� Process water and/or process air 

� Sewer 

Installation 

� In-house (labor, materials) 

� Piping, electrical, instrumentation, insulation, and painting 

� Contractor/vendor/consultant services, including fees 

� Construction supplies and support 

� Equipment rental 

Startup/Training 

� In-house (labor, materials) 

� Process adjustments 

� Report writing 

� Process/equipment testing, training 

� Safety/environmental training 

� Vendor/contractor services 

Regulatory Issues/Permitting 

� In-house (labor, materials) 

� Permit fees 

� Contractor/consultant services 

Other 

� Contingency 

� Any other items 

2.3.1.1 Site Preparation 

This subcategory of cost items is used to account for 

expenses that may be incurred prior to the acquisition of 

an ETV technology. It is usually more relevant for large 

“system” technologies, and could include items such as 

in-house labor, demolition and clearing, grading and landscaping, equipment rental, and vendor/contractor service charges. In-house labor and materials may be required for activities, such as engineering (e.g., to design 

Table 2-2. List of O&M Items 

Materials (purchase, delivery, storage) 

� Raw materials

� Chemicals

� Catalysts

� Operating supplies

Utilities 

� Water 

� Sewage 

� Energy (i.e., electricity, oil, gas, and/or steam) 

Labor 

� Operating

� Supervision

� Clerical 

Maintenance 

� Maintenance labor 

� Materials 

� Replacement parts (minor system components) 

Waste Management (labor, materials) 

� On-site handling

� Storage

� Treatment of waste 

� Hauling 

� Off-site treatment/disposal

� Generator fees

� Labeling

� Manifesting

Regulatory Compliance (labor, materials) 

� Permitting

� Training

� Monitoring/inspections/testing

� Record-keeping/reporting

Other 

� Any other items 

peripheral piping and instrumentation) or for building/ 

plant modifications to house the equipment. 

2.3.1.2 Buildings and Land 

This subcategory includes the space requirements and 

housing for the technology. It may include items such as 

building/plant modifications, facilities expansion, and construction of a special shelter to house the equipment. 

2.3.1.3 Purchased Equipment 

This subcategory is the core of most ETV cost evaluations. It is the purchase cost of the primary technology 

equipment and associated equipment (such as pumps, 

hoppers, etc.). This item may include equipment licensing and freight; monitoring/control equipment, laboratory 

equipment, and safety equipment also are included. 

7
2.3.1.4 Utility Connections/Systems 

This subcategory includes the cost of connecting the 

technology and associated equipment to providers of 

utilities such as electricity, water, and sewer. 

2.3.1.5 Installation 

Installation generally consists of labor and materials. 

Materials may consist of piping, structures, instrumentation, insulation, painting, and miscellaneous items. Inhouse labor may involve engineer, technician or skilled 

worker, and/or a supervisor. In addition to “in house” 

labor, contractor or vendor service charges may be 

applicable, as well as the contractor’s construction supplies and support. Equipment rental during installation is 

also included in this subcategory. 

2.3.1.6 Startup/Training 

Startup costs are extra operating costs incurred between the completion of installation and beginning of 

normal operations. It includes training, equipment tests, 

process adjustments, salaries and travel expenses of 

staff and consultants, report writing, and vendor fees. 

2.3.1.7 Regulatory Issues/Permitting 

This is the cost associated with obtaining the required 

permits to acquire and operate the technology. Permitting may include in-house labor, permit fees, and vendor 

and/or consultant charges. 

2.3.1.8 Other 

Any items that have not been included in Table 2-1 but 

are applicable should be listed in this subcategory. For 

example, “contingency" is a cost that may be added to 

an estimate to allow for any omissions and unforeseen 

costs; 10 to 15% is a typical range used to account for 

uncertainties. 

2.3.2 Identifying and Quantifying 

O&M Items 

Table 2-2 lists the common categories of O&M items 

likely to be encountered for an ETV technology. Not all 

items will be applicable to all technologies. The quantity 

of many O&M items generally is determined based on a 

user’s annual throughput requirement. For example, the 

quantities of labor, materials, and energy required to 

treat 180,000 gal/yr of wastewater are likely to be much 

higher compared to the quantities required to treat 

80,000 gal/yr. The annual throughput assumed for the 

cost evaluation should be stated clearly in the ETV cost 

report. 

2.3.2.1 Materials 

This subcategory is used to account for materials that 

are consumed during the operation of the ETV technology. It includes items such as raw materials, chemicals, 

catalysts, and operating supplies. 

2.3.2.2 Utilities 

Utilities include water, sewage, and energy (i.e., electricity, oil, gas, and/or steam) required to operate the ETV 

technology and associated equipment. 

2.3.2.3 Labor 

This subcategory is used to account for the labor (salary 

or wages) required to operate the ETV technology and 

includes operating labor, supervisory labor, and clerical 

labor, as applicable. 

2.3.2.4 Maintenance 

This subcategory includes the labor and material costs 

of keeping the technology in good working condition. If 

maintenance labor is expected to be minimal, it may be 

difficult or unnecessary to distinguish it from operating 

labor. The materials could include items such as lubricants or filters. 

2.3.2.5 Waste Management 

Waste management includes the labor, materials, energy, or service charges/fees required for the handling, 

storage, and treatment (or off-site disposal) of any 

wastestream generated by the technology. 

2.3.2.6 Regulatory Compliance 

Regulatory compliance and environmental health and 

safety costs associated with the technology can include 

the labor and materials for permitting, training, monitoring, and record-keeping. 

2.3.2.7 Other 

Any items that are applicable to the ETV technology but 

are not included in Table 2-2 should be listed in this 

subcategory. 

2.4 Listing the Assumptions Involved 

in a Cost Evaluation 

Often, there are limitations in measuring actual quantities and costs of the inputs and outputs involved in a 

technology application. Working assumptions must be 

made based on the engineering judgement of the ETV 

pilot managers or on information provided by vendors. 

These assumptions should be mentioned in the ETV 

cost report so that potential users of the technology can 

8
assess the basis and limitations of the cost evaluation. 

Common assumptions may involve the following: 

• Expected life of the technology: One technology 

feature that is often required for cost evaluation is 

the life of a technology. The life of a technology is 

important because it determines the total period 

over which the cost evaluation is applicable. For 

example, if a new catalytic oxidizer is expected to 

last for 7 years, then another catalytic oxidizer (or 

similar technology) will have to be purchased 

after 7 years, and a new cost cycle will begin. The 

life of a technology generally refers to the useful 

life of the primary equipment involved. For example, for a solvent recycling technology, the distillation still is the primary piece of equipment and 

may be expected to last for 10 years. Although 

some associated pieces of equipment (e.g., 

pumps) may wear out earlier, replacement of 

peripheral equipment may be handled as an O&M 

item (i.e., maintenance) as long as the primary 

equipment lasts. The expected life of the primary 

equipment generally can be determined on the 

basis of prior experience with similar equipment 

in the industry. The technology vendor also can 

provide some guidance on how long a particular 

piece of equipment may be expected to last. 

• Cost items that are not relevant in the cost 

evaluation: Any assumptions regarding the exclusion of certain cost items from the evaluation 

should be mentioned. For example, some pilot 

managers may exclude the capital item “Buildings 

and Land” if it is not relevant to the cost 

evaluation. 

• Cost items that are relevant but not included in 

the cost evaluation: In some cases, certain cost 

items may be relevant to the cost evaluation, but 

may not be obtainable for some reason. Such 

items should be mentioned in the list of assumptions. Some pilot managers have indicated that 

they may exclude portions of the capital investment category because vendors in their industry 

generally are reluctant to divulge the cost of 

capital items. 

• Capital and O&M costs: Assumptions regarding 

the quantities of capital and O&M items assumed 

for the evaluation should be mentioned, especially when an extrapolation is involved in estimating annual quantities from shorter-duration ETV 

tests. When quantities are determined from 

sources other than direct measurements taken 

during the ETV test, the source of these data 

should be mentioned. 

• Other: Any other assumptions that may affect the 

interpretation of the reported costs should be 

mentioned. 

2.5 Listing the Technical Factors 

that Impact Costs 

A single technology may be applicable under a variety 

of operating conditions, some of which may be different 

from the test conditions used during the ETV process. 

Some of this variability may be within the capacity of the 

technology to handle; some may not. Therefore, it is 

important not only to specify the conditions of the ETV 

test, but also to indicate which factors might significantly 

impact the overall cost of the technology. Examination 

of the design basis may provide an indication of the 

technical factors that impact costs. 

For example, a catalytic oxidation unit may require considerably more energy (and higher O&M cost) to treat a 

feed airstream containing 30% humidity than a feed airstream with 10% humidity. Therefore, humidity should be 

listed as a factor impacting the cost of the technology. 

The volatile organic content of the airstream may affect 

the frequency with which the catalyst must be replaced 

or regenerated (a maintenance item). Therefore, the level 

of organics in the airstream should be listed as a factor 

affecting maintenance cost. Whether or not the effect of 

these factors is quantified depends on the level of cost 

evaluation desired by the individual pilot managers. 

Quantifying how much more energy and how much more 

maintenance (and the associated higher costs) may be 

required for the full range of these factors (humidity and 

level of organics) is a level of detail that would have to 

be a part of the technical verification of the technology, 

and would involve one or more of the following steps: 

• Testing the technology under multiple test conditions (that is, with various input and operating 

characteristics). 

• Using the informed engineering judgment of the 

pilot managers. In many cases, past experience 

with similar technologies can serve as a guide for 

identifying technical factors impacting costs. For 

example, even if ETV testing of a new energyefficient residential water heater does not include 

testing at different inlet water temperatures, pilot 

managers may be able to predict that the energy 

requirement (and therefore the O&M cost) of the 

water heater is likely to be higher when the input 

water is cooler and lower when the input water is 

warmer. In this example, the inlet water temperature (which depends on the location of the user) is 

a technical factor impacting annual energy cost. 

9
• Acquiring data from the technology vendor 

regarding previous applications of the ETV or 

similar technologies.

Although quantifying these impacts may be difficult, pilot 

managers at a minimum should identify and list the factors likely to significantly affect any of the relevant cost 

items. If such impacts can be quantified, pilot managers 

could provide a range of quantities instead of a single 

number. For example, instead of reporting the energy 

requirement of an energy-efficient water heater as 

22,000 kBTU/yr, pilot managers could report it as 

20,000-24,000 kBTU/yr, to cover the expected range of 

energy consumption based on average inlet water temperatures in different geographical regions, or on water 

usage, or on other variables. 

2.6 Listing the Intangible Benefits 

and/or Disadvantages 

of a Technology 

Intangible benefits/disadvantages of an ETV technology 

are those features that cannot be quantified by the monetary cost evaluation, but nevertheless are relevant to the 

buyer’s decision. Although they are difficult (or impossible) to quantify, the intangible benefits and/or disadvantages of a technology can outweigh the results of the 

tangible cost evaluation, thus affecting the buy/no-buy 

decision of potential users. 

For example, potential users may find it beneficial to 

implement the ETV technology even if it costs more 

than the baseline technology. Table 2-3 is a checklist of 

possible ETV technology benefits and disadvantages. 

Given the wide variety of technologies involved in the 

ETV Program, this is by no means a comprehensive list; 

however, it may be used as a guide to identify and list 

relevant benefits/disadvantages. 

Table 2-3. List of Intangible Benefits/Disadvantages 

Benefits 

� Energy conservation 

� Water conservation 

� Reduced ozone depletion 

� Reduced future liability 

� Reduced global warming 

� Reduced Toxics Release Inventory 

� Promotion of positive public relations 

� Increased plant safety 

� Increased ease of use 

� Superior product or unique service provided 

� Other (state here)

 ___________________________ 

Disadvantages 

� Higher maintenance requirements

� Increased energy consumption

� Other (state here)

 ___________________________ 

2.7 Preparing a Cost Evaluation Report 

The recommended reporting format for the Itemization 

of Costs option includes the following elements: 

• Cost evaluation objective and data collection 

methods

• Design basis 

• Table of capital items 

– Include the description and quantity of each 

capital item 

• Table of O&M items 

– Include the description and quantity of each 

O&M item 

• List of assumptions 

• List of technical factors that impact costs 

• List of intangible benefits/disadvantages. 

10
3. Estimation of Capital Investment and O&M Costs 

In this section, cost evaluation is taken a step further 

than the process described in Section 2 for itemizing 

costs. To estimate the monetary (dollar) costs of the 

capital and O&M items described in Section 2, unit costs 

(or prices) of the various items need to be determined 

and multiplied by the quantities of each item. This process of monetizing relevant cost items allows pilot managers to combine costs and thereby to obtain a more 

comprehensive perspective of the technology. The impact of various cost items (e.g., labor and materials) can 

be combined only when they are quantified with a common measure, and monetizing the cost items provides 

this common measure. For example, the electricity consumption (measured in kWh) and the labor requirement 

(measured in hours) of a technology can be combined 

only when they are converted to dollar amounts. 

3.1 Estimating Capital Investment 

Section 2.3.1 describes the various capital items that 

may be encountered when evaluating the cost of an ETV 

technology. In the Itemization of Costs option described 

in Section 2, the quantity of each capital item required to 

fulfill the design basis of the user is identified and listed. 

To estimate the dollar value of a capital investment, the 

unit cost (or price) of each capital item needs to be 

obtained and listed as shown in Table 3-1. The quantity 

of each capital item is multiplied by its unit cost to obtain 

the dollar value of each item. All of the items then can 

be added to obtain the total capital investment. 

3.2 Estimating O&M Costs 

Section 2.3.2 describes the various O&M cost items 

likely to be encountered by ETV pilot managers. The 

unit costs (prices) of these items are required in order to 

convert the quantities of these items to dollar costs. As 

shown in Table 3-2, the cost of each O&M item is estimated by multiplying the quantity of an item with its unit 

cost. 

Table 3-1. Capital Investment for a Hypothetical 

Water Treatment Unit 

Water Treatment Unit 

Item Quantity* Unit Cost Cost 

Buildings and Land 

Prefabricated steel structure 1 $5,000 $5,000 

Purchased Equipment 

Water treatment package plant 1 $21,625 $21,625 

Upgrades to standard package plant 

Chemical feed for well supply 1 $1,000 $1,000 

Air compressor 1 $1,000 $1,000 

Chlorine monitor 1 $3,225 $3,225 

Flowmeter package 1 $2,600 $2,600 

Telemetry system and software 1 $2,220 $2,220 

Underground waste storage system 1 $6,845 $6,845 

Freight 1 $900 $900 

Installation 

Technician 100 hr $35/hr $3,500 

Engineer 100 hr $60/hr $6,000 

Startup/Training 

Vendor startup services 1 $4,000 $4,000 

Total Capital Investment $57,915 

* For the design basis described in the illustrative example in 

Appendix A. 

3.3 Additional Considerations in 

Estimating Capital Investment 

and O&M Costs 

A few issues may be important to note while estimating 

capital investment and O&M costs. One issue to note is 

the purchase price of the primary ETV technology 

equipment (for example the filtration unit for an ultrafiltration technology), because this price is often a significant part of the capital investment and is a unit cost that 

needs to be obtained from the vendor. However, when 

large customized pieces of equipment are involved, 

vendors sometimes are reluctant to divulge their prices. 

In this case, pilot managers may have no choice but to 

exclude the cost of the primary equipment from the cost 

evaluation. 

11
Table 3-2. Annual O&M Costs for a Hypothetical Nickel Recovery System 

Electrodialysis System 

Item Annual Quantity* Unit Cost Annual Cost 

Materials 

Makeup water 15,000 gal $4.19/1,000 gal $63 

Chemicals, NiSO4 used 180,000 lb $1/lb $180,000 

Chemicals, NiSO4 recycled -171,000 lb $1/lb -$171,000 

Utilities 

Steam 4.9 · 108

 BTU $6/106 BTU $2,940 

Electricity 78,600 kWh $0.118/kWh $9,275 

Maintenance 

Service contract 4 visits $3,000/visit $12,000 

Carbon change 6 events $1,020/event $6,120 

Evaporator cleaning 12 events $120/event $1,440 

Miscellaneous upkeep 1 $1,000 $1,000 

Total Annual O&M Cost $41,838 

* For the design basis described in the illustrative example in Appendix B. 

On the other hand, pilot managers generally are not dependent on technology vendors for the costs of other 

capital items, such as site preparation and installation. 

The quantity and unit costs of these capital items can 

either be determined during the technology verification 

part of the ETV test or estimated from other sources. 

For example, pilot managers may determine during the 

ETV test that installation of an ultrafiltration unit requires 

40 hours of labor at $50/hour and 30 ft of pipe at $2/ft. 

The installation cost of the ultrafiltration unit can be calculated from these data. Other sources for estimating 

the costs of these capital items includes the engineering 

judgement of pilot managers or vendors (based on experience with other similar equipment) or published references that list costs or cost factors for these items. These 

references are described in Appendix D. Cost factors are 

rule-of-thumb cost estimates for certain items based on 

the cost of other associated items. For example, based 

on the information compiled in such references, pilot 

managers may estimate that “installation” cost is 20% of 

the “purchased equipment” cost of a technology. If these 

alternative estimation sources are used, then they should 

be identified in the list of assumptions. 

Another issue that needs to be noted is that the unit 

costs (prices) of various capital and O&M items are 

likely to vary from user to user and from technology to 

technology. To handle this variability, it is important to 

clearly state the unit cost numbers in the ETV cost 

evaluation report. A stated list of unit cost numbers (as 

shown in Table 3-1) permits individual users to see how 

their own unit costs differ from the unit costs applied in 

the ETV cost evaluation. Users can thereby assess the 

impact of these differences on the overall cost of a technology. Representative unit costs of several capital items 

associated with environmental technologies can be 

obtained from cost references such as the Environmental Remediation Cost Data—Unit Price handbook (R.S. 

Means Company, Inc., and Talisman Partners, Ltd., 

2001). This handbook provides representative unit costs 

for a variety of associated equipment, such as pumps, 

piping, and valves, along with the cost of their installation. 

Another issue relates to the procedure for handling the 

potential income from use of certain pollution prevention 

technologies. Some pollution prevention or recycling technologies can generate income for the user from the ability 

to market or reuse a recycled product. In this document, 

the recommended way of dealing with this income is to 

show it as an O&M cost with a negative sign. This negative number serves to reduce the annual O&M cost of the 

ETV technology. For the nickel recovery system example 

presented in Table 3-2, 171,000 lb of nickel sulfate are 

recovered and reused in the electroplating operation. The 

value of this recycled nickel (as nickel sulfate) is entered 

in the table as a negative number. The recycled nickel 

serves to reduce the amount of nickel sulfate that the 

plant needs to purchase annually. The value of the recycled nickel is therefore credited toward the annual O&M 

cost of the electrodialysis technology. A more detailed 

cost analysis that compares the annual operating cost of 

the nickel recovery system and the baseline operation is 

presented as an example in Appendix B. 

Several of the cost items in Tables 3-1 and 3-2 involve 

in-house labor, which is an item that may be represented in terms of the salaries or wages paid to personnel conducting the work. If any other associated costs 

are included in the in-house labor item, they should be 

stated in the list of assumptions (see Section 2.4). Costs 

associated with labor could include fringe benefits (e.g., 

vacation or sick leave) and other overhead items, and 

these costs are sometimes factored in the labor rate. 

Because many of these associated costs are likely to 

vary from user to user, it may be simpler to estimate 

labor costs in terms of just salaries or wages. 

12
3.4 Listing the Assumptions • Cost evaluation objective and data collection 

Any assumptions made regarding the unit costs (prices) 

for the capital and O&M items should be mentioned, so 

that users can compare them with their own unit costs. 

For further details on listing assumptions, see Section 2.4. 

3.5 Listing the Technical Factors 

that Impact Costs 

See the discussion in Section 2.5. 

3.6 Listing the Intangible Benefits/ 

Disadvantages of a Technology 

See the discussion in Section 2.6. 

3.7 Preparing a Cost 

Evaluation Report 

The recommended reporting format for the Estimation of 

Capital Investment and O&M Costs option includes the 

following elements: 

methods 

• Design basis 

• Table of capital investment 

– Include the quantity and unit cost (price) of each 

capital item 

• Table of O&M costs 

– Include the quantity and unit cost (price) of each 

O&M item 

• List of assumptions 

• List of technical factors that impact costs 

• List of intangible benefits/disadvantages. 

3.8 Reference 

R.S. Means Company, Inc., and Talisman Partners, Ltd. 

2001. Environmental Remediation Cost Data—Unit Price, 

7th ed. 

13
4. Calculation of Total Annualized Cost, Simple Payback Period, 

or Present Value 

Sections 2 and 3 describe how to quantify capital and 

O&M items and how to estimate the costs of these 

items. A cost analysis serves to assess the total impact 

of the ETV technology on a potential user and also 

facilitates the comparison of the ETV technology with a 

baseline or competing technology. The total user impact 

of a technology can be assessed by combining capital 

investment and O&M costs into an overall technology 

cost involving one of the following measures: 

• Total annualized cost 

• Simple payback period 

• Present value (PV) of a technology. 

4.1 Calculating the Total 

Annualized Cost 

Calculating the total annualized cost of a technology 

involves combining the capital investment and annual 

O&M cost. Because O&M costs are measured on an 

annual basis ($/year), the capital investment must be 

annualized in order to combine these costs. In the following equation, the annual O&M costs are added to an 

annualized capital investment term to obtain a total 

annualized cost for the technology: 

Ø Total ø ØAnnualizedø ØAnnualø Œannualizedœ = Œ capital œ + Œ O & M œ (4-1) Œ œ Œ œ Œ œ o cost ß oinvestmentß o cost ß 

The annualized capital investment term can be interpreted as a fixed annual payment that a user would have 

to make every year over the life of the technology. The 

annualized capital investment can be estimated using 

the following equation, which shows how the capital investment can be annualized based on a discount rate, r: 

ØAnnualizedø Œ capital œ = Capital investment (4-2) t=n Œ

investmentœ 1 o ß � (1+ r)t 

t=1 

The discount rate accounts for the return (or interest) 

that the money assigned for capital investment would 

earn if the capital items were paid for over several years, 

at the end of each year (time, t = 1, 2, 3, ..., n). The 

appropriate discount rate will vary from industry to industry and pilot managers need to select a rate accordingly. The values of the denominator of Equation 4-2 

have been documented for various values of r and n; 

these denominator values are presented in Appendix E, 

and can be used in Equation 4-2 to facilitate the calculation. 

Appendix A provides an example calculation of total annualized cost for a dual-stage filtration system installed 

in a drinking water plant. 

Total annualized cost also can be represented on the 

basis of each unit of throughput to obtain a unit annualized cost for a technology, as shown in Appendix F. Unit 

annualized cost numbers (e.g., $0.25 per gallon of water 

treated) obtained from total annualized cost estimates 

can be misleading because the unit cost of a technology 

is dependent on the design basis, particularly the annual 

throughput. Therefore, different users may experience 

different unit costs for the same technology, depending 

on their throughputs. However, unit costs often are used 

in some industries for comparing technologies. 

4.2 Calculating the 

Simple Payback Period 

The simple payback period is defined as the time period 

over which the net O&M income and/or savings become 

equal to the initial capital investment. Calculating the 

simple payback period for a technology is a method of 

assessing the overall cost impact of a technology by 

estimating the time it would take to recover the initial 

capital investment. The simple payback period method 

is based on the assumption that implementing the ETV 

technology will generate measurable annual O&M savings or income for the user. Net O&M income and/or 

savings from implementing the new technology can 

14
arise in two possible ways. First, the ETV technology 

could generate a product or byproduct that has a marketable value greater than the O&M cost for operating 

the technology. This could happen, for example, when a 

solvent recycling technology generates recycled solvent 

that can be sold (or reused) to generate significant income. Second, net O&M savings could occur when the 

O&M costs of the ETV technology are lower than the 

O&M costs of the baseline technology that it replaces. 

This could happen, for example, when a conventional 

water heater is replaced with an energy-efficient heater. 

The reduction in energy usage (an O&M item) would 

lead to a reduction in O&M costs; the resulting savings 

could offset the initial capital investment over time. 

Equation 4-3 can be used to calculate simple payback 

period when the annual O&M savings are constant 

every year, which is often the case. The discount rate or 

the rate of return that is forgone on the capital investment is ignored in this simplified equation. Therefore, 

this equation is useful as a quick analytical tool for 

assessing the attractiveness of the technology. The 

denominator in Equation 4-3 is the net annual O&M 

after-tax savings, which can be calculated as shown in 

Equation 4-4. In this equation, net annual O&M savings 

is the difference between the annual O&M cost of the 

baseline/competing technology and the annual O&M 

cost of the ETV technology. To estimate the net savings 

on an after-tax basis, Equation 4-4 includes a factor 

based on the corporate income tax rate. 

Ø Simple ø Ø Capital investment ø 

Œpaybackœ Œfor the ETV technologyœ

Œ period œ = o 

ØNet annual O & Mø

ß (4-3) 

Œ œ o (years) ß Œ

oafter - tax savingsœß 

Section 4.3 offers a method for calculating discounted 

payback period that accounts for the rate of return, as 

well as for cases when annual O&M costs vary from 

year to year. Appendix B offers an example calculation 

of simple payback period for a nickel recovery system 

for treating wastewater from a metal-plating operation. 

ØNet annualø Œ O & M œ ØNet annualø Ø �

�

Corporate�

�

ø 

Œ after - tax œ = Œ O & M œ · Œ1- � income �œ (4-4) 

Œ œ Œ

o savings œß Œ

o �� tax rate ��

œ

ß o savings ß 

4.3 Calculating the Present Value 

of a Technology 

The present value (or life cycle cost) of an ETV technology is defined as the value of all the costs incurred 

over the useful life of a technology discounted to the 

base time (time of acquisition of the technology). These 

costs include the initial capital investment, which generally is incurred as soon as the new technology is 

acquired, and annual O&M costs and/or savings, which 

occur over several years as the technology is used. In 

order to combine present and future cash flows, any 

estimation of total lifetime cost must incorporate the 

effects of time on these cash flows. The most common 

way to account for the effects of time is by calculating 

the PV of all costs (capital investment and O&M costs) 

incurred in the present and future. 

In general, a technology user usually needs enough 

cash today to pay for the full amount of the capital 

investment. However, O&M cash flows that are scheduled to occur in the future tend to free up money for 

productive uses in the present. Using PV calculations, a 

user can determine how much money he/she could set 

aside (i.e., invest in productive uses) today in order to 

grow the money to an amount equal to these future 

O&M costs. For example, if a user wanted to invest 

enough money today to pay for O&M costs that are 

likely to occur over the next three years, he/she would 

use the PV equations described in the following subsections to calculate PV where time t = 3. 

Generally, cash flows for an ETV technology are measured on an annual basis. The PV of a series of cash 

flows (CFt) that may occur at different points in time (t) 

over a total time period (n) may be estimated using the 

following general equation: 

t=n 

t PV of cashflows =� CF (4-5) (1+ r)t 

t=0 

Time t = 0 represents the present or the time when the 

technology is first acquired; also, all cash flows that 

occur in a given year are assumed to occur at the end of 

the year, so fractional values of t are avoided. 

If all cash flows are estimated in real dollars or constant 

dollars, then r is the real discount rate, a rate which discounts future real cash flows to the present. The real 

discount rate reflects the real earning power of money 

over time. This approach is easier for cost analysis because it is easier to estimate costs in constant dollars, 

and it automatically accounts for any inflation that may 

occur. Therefore, the real discount rate (r) is based on 

the user’s expectation of the real return on his/her prudent investment, and this expectation may vary from 

industry to industry. It is important to mention clearly the 

real discount rate assumed in the ETV cost analysis. 

ØPV ofø Œ cashœ = CF0 + 

CF1 + CF2 + ... + CFn (4-6) Œ œ 1 2 n 

oflowsß (1+ r) (1+ r) (1+ r) 

where, for many technologies: 

15
n = life of the equipment in years 

CF0 = capital investment 

CF1, CF2, ...CFn = annual O&M costs in 

Years 1, 2, ..., n. 

For most ETV technologies, the capital investment will 

result in a cash outflow at time t = 0, and all future cash 

flows will result from O&M costs. Also for many ETV 

technologies, the annual O&M costs are likely to be the 

same every year. In this case, Equation 4-5 can be simplified as: 

PV = Ø Capital ø + 

Ø

Œ(O & M cost)· �

�

� n 1 �

�

�ø

œ (4-7) Œ

o investmentœß � o

Œ �� t=1 (1+ r)t ��ßœ 

The values of the factors in braces { } have been documented for different values of r and n, and are listed in 

Appendix E. Equation 4-7 is a simplified way of calculating the PV of an ETV technology when the O&M 

costs are the same every year. However, if O&M costs 

are likely to vary from year to year, Equation 4-5 or 4-6 

must be used. Equation 4-5 or 4-6 also can be represented in a spreadsheet for ease of calculation. Appendix C provides an example spreadsheet calculation of 

PV for an energy-efficient water heater and a competing 

technology. 

A PV spreadsheet also allows an easier determination 

of the discounted payback period. Section 4.2 describes 

a simple payback period calculation that does not take 

into account the time value of money. A discounted 

payback period is defined as the time (in number of 

years) that it takes to recover the initial capital investment in the ETV technology, given a discount rate (r). In 

a PV spreadsheet, the discounted payback period is the 

year in which the cumulative PV of the ETV technology 

becomes equal to the cumulative PV of the baseline 

technology. An example of a discounted payback period 

estimation based on a PV spreadsheet is shown in 

Appendix C. 

An important consideration when comparing the ETV 

technology with a baseline technology is that the capital 

investment in the baseline technology should be excluded from the cost evaluation. The capital investment in 

the baseline technology has already occurred in the past 

and is irrelevant to today’s decision on whether or not to 

buy the ETV technology. Therefore, only the ongoing 

O&M costs of the baseline technology need to be considered, along with the capital investment and O&M costs of 

the ETV technology. On the other hand, both capital 

investment and O&M costs need to be considered when 

the comparison involves two competing technologies, 

because both the ETV technology and the competing 

technology require a fresh capital investment. 

If the baseline technology equipment has significant salvage value, it may be included in the PV of the ETV 

technology as a cash inflow or income at time t = 0, 

which will serve to offset the capital investment required 

for the ETV technology. For simplicity, the salvage value 

of capital equipment can be excluded from present 

value calculations. The salvage value is difficult to 

estimate and is often less than the cost of recovering 

the equipment. If salvage value is significant, but not included, then it should be explained in the list of assumptions that the analysis does not include salvage value. 

An advantage of the PV analysis is that technologies 

with different lifetimes can be compared. In this case, 

the PV should be calculated for a period equal to the 

lowest common multiple of the two lifetimes. For example, if Technology A has a life of 5 years and Technology B has a life of 3 years, a second capital investment 

will be required in Technology B at the end of Year 3. In 

real dollars, the second capital investment may be the 

same or lower than the first capital investment; some 

capital items, such as training and permitting, may not 

have to be reincurred. Equation 4-6 can be used to 

determine the PV cost of the technologies. In this case, 

the PV analysis should be done for each technology 

over a period of 15 years. For Technology B, the cash 

flow in Years 3, 6, 9, and 12 (CF3, CF6, CF9, and CF12) 

will include, in addition to the O&M cost for the full 

15 years, the capital investment required to replace the 

primary equipment. A spreadsheet may be used to facilitate calculation of PV when the time period of the analysis is very large. 

4.4 Comparing Two Technologies 

Often, the cost of an ETV technology will be evaluated 

against the cost of a baseline technology or a competing 

technology. The total annualized cost, simple payback 

period, or PV may be calculated separately (using an 

equivalent design basis) for each of the technologies involved in the comparison. The technology with the lower 

total annualized cost, simple payback period, or PV may 

be expected to provide a better return on investment or 

generate lower overall costs. 

The intangible benefits and/or disadvantages of the ETV 

technology should also be considered a part of the technology comparison. Even if an ETV technology has a 

higher overall cost, the intangible benefits of using an 

environmentally friendly technology may be attractive 

enough to affect the decision of a potential user. 

16
4.5 Preparing a Cost 

Evaluation Report 

The recommended reporting format for the Calculation 

of Total Anualized Cost, Simple Payback Period, or 

Present Value approach includes the following elements: 

• Cost evaluation objectives and data collection 

methods

• Design basis 

• Table of capital investment 

– Include the quantity and unit cost (price) of each 

capital item 

• Table of O&M costs 

– Include the quantity and unit cost (price) of each 

O&M item 

• List of assumptions 

– Expected life of the technology used for the cost 

evaluation 

– The discount rate used 

– Other assumptions 

• List of technical factors that impact costs 

• List of intangible benefits/disadvantages 

• Total annualized cost, simple payback period, or 

PV. 

17
Appendix A

Illustration of Capital Investment/O&M Cost Estimation and 

Total Annualized Cost Analysis of a Dual-Stage Filtration System in a 

Drinking Water Plant

This example cost evaluation incorporates the eight bulleted elements listed in Section 4.5 and calculates the 

total annualized cost of a hypothetical dual-stage pressure filtration (DSF) unit. 

The technology used in this illustration is a prepackaged 

filtration technology for a community drinking water system designed to reduce turbidity and iron to new regulatory target levels in the treated water. The technology 

consists of a prepackaged DSF unit. 

A.1 Defining the Cost Evaluation Objective 

and Data Collection Methods 

The first element is to define the objective of the cost 

evaluation and to describe the methods used to accomplish the objectives. The objective of the evaluation was 

to estimate the cost of the DSF application for a typical 

community drinking water treatment plant and compare 

it to a competing technology. The competing technology 

is a conventional coagulation/filtration unit. In this example, the cost analysis includes an estimation of the total 

annualized cost of the DSF unit. 

For the verification test, the DSF unit was installed at an 

existing small community water treatment site. The test 

site was selected because of the nature of its water 

quality, high turbidity, and elevated iron levels. Performance and cost data were gathered for one year. Capital 

investment and O&M costs were tracked during the test; 

however, site-specific factors can contribute to wide 

variations in the costs a system incurs for treatment. 

The cost of the competing (conventional) technology 

was estimated by a combination of reported costs from 

existing plants and engineering judgment. 

A.2 Describing the Design Basis 

The next element is to describe the design basis of the 

technology. The DSF unit is designed to operate automatically with off-site monitoring through a telemetry 

system by the operator. Daily turbidity levels in groundwater averaged 5 to 30 nephelometric turbidity units 

(NTU). The system was required to achieve 0.5 NTU in 

95% of the samples collected, reduce iron to improve 

taste and odor, and supply water to 35 connections and 

100 persons. The system operated an average of 300 

hrs per month, the service flowrate averaged 10 gpm, 

and 2.16 million gallons of water were produced during 

one year. The design basis is summarized in Table A-1. 

Table A-1. Design Basis for the DSF Unit 

DSF Unit 

Service flow, gpm: 10 

Annual throughput (drinking water produced), gal/yr: 2.16 million 

Number of connections: 35 

Average turbidity levels: 5 to 30 NTU 

Turbidity removal: 95% 0.5 NTU 

A.3 Estimating Capital Investment 

The next element is to determine the capital investment 

for the DSF unit. Table 2-1 in Section 2 of this document 

provides a checklist of capital items. For this example, 

the relevant capital items that apply include the cost of 

buildings and land, purchased equipment, installation, 

and startup/training. Regulatory/permitting and contingency items were not included in this estimate because 

no permits were involved for the demonstration. Also, 

because actual (and not budgeted) installation costs were 

available, no contingency was included. The source of 

18
the cost data is provided so that the user can verify the 

information or compare the data with other cost estimates. For this illustration, costs incurred during the purchase, installation, and startup of the technology were 

tracked during the verification test. The vendor provided 

the purchase price of the prepackaged equipment. 

Items such as upgrades that were not a part of the 

standard package are included in the purchase price, 

whereas items that were added for the purpose of 

demonstration (such as extra monitoring equipment) are 

excluded. Table A-2 summarizes the capital investment 

required for the DSF unit. 

Table A-2. Capital Investment for the DSF Unit 

DSF Unit 

Unit 

Item Quantity* Cost Cost 

Buildings and Land 

Prefabricated steel structure 1 $5,000 $5,000 

Purchased Equipment 

DSF Package 1 $21,625 $21,625 

Upgrades to standard package plant 

Chemical feed for well supply 1 $1,000 $1,000 

Air compressor 1 $1,000 $1,000 

Chlorine monitor 1 $3,225 $3,225 

Flowmeter package 1 $2,600 $2,600 

Telemetry system and software 1 $2,220 $2,220 

Underground waste storage system 1 $6,845 $6,845 

Freight 1 $900 $900 

Installation 

Technician 100 hr $35/hr $3,500 

Engineer 100 hr $60/hr $6,000 

Startup/Training 

Vendor startup services 1 $4,000 $4,000 

Total Capital Investment $57,915 

* Refer to Table A-1 for the design basis. 

The capital investment required for a similar-sized conventional coagulation/filtration unit was reported by other 

drinking water plants to be $75,680 (adjusted based on 

engineering judgment). 

A.4 Estimating O&M Costs 

The next element is to determine the relevant O&M 

costs. For this illustration, Table 2-2 in Section 2 of this 

document was used as a guide; O&M items include 

materials (chemicals), utilities (energy and telephone), 

labor (operating, maintenance), and regulatory compliance (monitoring), all of which are considered relevant. 

The unit cost and amount required for each component 

were estimated based upon the observations made during the test and discussions with the vendor. Some 

minor system components associated with the DSF unit 

will require replacement approximately every 5 years. 

The periodic replacement cost (maintenance cost item) 

was determined as an annual O&M cost by dividing the 

replacement cost by the expected life, as shown in 

Table A-3. The vendor provided information regarding 

the expected life of the minor system components. 

Annual O&M costs are summarized in Table A-4. 

Table A-3. Estimation of Annual Replacement Costs 

for the DSF Unit 

Item Annual Cost 

Anthracite $300 

Feed pumps $2,000 

Raw water pump $2,000 

Backwash pump $2,200 

Turbidimeter $4,500 

Chlorine monitor $3,000 

Total Replacement Cost $14,000 

Expected Life 5 years 

Annual Replacement Cost* $2,800/year 

* Part of maintenance cost item. 

Table A-4. Annual O&M Costs for the DSF Unit 

DSF Unit 

Annual Annual 

Item Quantity* Unit Cost Cost 

Materials 

Coagulant 60 gal $9/gal $540 

Chlorine 48 gal $1.6/gal $76.8 

Utilities 

Electricity 12 months $120/month $1,440 

Telephone 12 months $80/month $960 

Labor 

Operating labor (includes 

maintenance) 96 hrs $35/hr $3,360 

Regulatory Compliance 

Monthly microbiological sampling 12 samples $20/sample $240 

Quarterly tests for iron 4 samples $30/sample $120 

Maintenance 

Labor (included in operating labor 

as itemized above) – – – 

Materials Misc. $400 $400 

Replacement of filter media and 

equipment (annualized) 1 $2,800 $2,800 

Total Annual O&M Cost $9,937 

* Refer to Table A-1 for the design basis. 

The annual O&M cost of the similarly sized conventional 

technology was estimated to be $18,900. This estimate 

was based on the costs reported by other plants and the 

engineering judgment of the cost engineer. 

19
A.5 Listing the Assumptions 

The next element is very important because it allows 

users to verify and compare the cost data with other cost 

estimates. The following key assumptions that impact 

the cost analysis, such as operating parameters, also 

should be included: 

• The expected life of the DSF unit is 20 years. The 

time period of the cost analysis is 20 years. The 

same assumptions were made for the conventional technology. 

• Costs are in real (constant 2001) dollars. 

• The real discount rate used is 6%. 

• Cash flows occur at end of the year. 

• The maintenance cost is based on the vendor’s 

recommendation on replacement of filter media 

and associate pumps and meters every 5 years. 

The replacement cost of the filter media and associated equipment is $14,000. The annual replacement cost ($2,800) was calculated by dividing the 

replacement cost by the expected life. 

• Extra capital investment and O&M items, such as 

labor, were required for the verification testing. 

The testing-related effort and costs have been 

deducted to reflect the cost of routine operation. 

• Costs associated with regulatory/permitting 

activities and contingency are not included in 

the estimate.

A.6 Listing Key Technical Factors 

that Impact Costs 

Another important element is to identify key technical 

factors that impact costs. For the DSF unit, the technical 

factors affecting cost are: 

• If the feed water contains high levels of colloidal 

solids, filters may have to be replaced more 

frequently, thus increasing maintenance cost. 

A filter aid may be necessary.

• High levels of total organic carbon in the feed 

water may increase chlorine demand and 

increase O&M costs.

A.7 Listing the Intangible 

Benefits/Disadvantages 

The intangible benefits and disadvantages of the technology should be described, using Table 2-3 of Section 2 

as a guideline. Good public relations achieved by the 

plant due to the improved drinking water supply was the 

main intangible benefit of the DSF system. 

A.8 Calculating Total Annualized Cost 

To calculate the total annualized cost of the DSF system, the following equations were used: 

Ø Total ø ØAnnualizedø ØAnnualø Œannualizedœ = Œ capital œ + Œ O & M œ (A-1) Œ œ Œ œ Œ œ o cost ß oinvestmentß o cost ß 

ØAnnualizedø Œ capital œ = Capital investment (A-2) t=n Œ œ 1 oinvestmentß �=1 (1+ r)t

t 

57,915 = (A-3) 11.46992 

= $5,049 (A-4) 

Total annualized cost = $5,049 + $9,937 = $14,986. 

Here, r is the real discount rate (assumed as 6% for this 

cost evaluation). The estimated life (n) of the technology 

is 20 years. For r = 6% and n = 20, the denominator in 

Equation A-2 is 11.46992 (from Appendix E). The capital investment ($57,915) and annual O&M costs 

($9,937) are obtained from Tables A-2 and A-4, respectively. The total annualized cost based on Equation A-1 

is $14,986/year. 

In the same way, based on a capital investment of 

$75,680 and an annual O&M cost of $18,900, the total 

annualized cost of the conventional coagulation/filtration 

technology was calculated as $25,498/year. A discount 

rate of 6% and a life of 20 years was assumed for the 

conventional unit. 

The total annualized cost of the DSF unit ($14,986/year) 

is lower than the total annualized cost of the conventional unit ($25,498/year). The DSF unit is therefore more 

economical. 

20
Appendix B

Illustration of Capital Investment/O&M Cost Estimation and 

Simple Payback Period Analysis of an Electrodialysis System

This cost evaluation report for an electrodialysis system 

incorporates the eight bulleted elements listed in Section 4.5 and calculates a simple payback period. 

The technology used in this illustration is an electrodialysis system that recovers nickel (as nickel sulfate) 

and removes other dissolved solids from rinsewater, 

allowing the recovered water to be reused as rinsewater 

in the nickel electroplating line. The technology eliminates the generation of wastewater requiring treatment 

and off-site disposal of sludge containing hazardous levels of nickel. It also allows the recovered nickel sulfate 

to be reused in the electroplating bath. The cost analysis will estimate the years to pay back the cost of purchasing and installing the electrodialysis system based 

on the annual savings realized. 

B.1 Defining the Cost Objectives and 

Data Collection Methods 

The first element is to define the objectives of the cost 

analysis and to describe the methods used to accomplish the objectives, as well as the limitations of the testing. In this example, the objective of the cost analysis is 

to estimate the cost of the electrodialysis treatment and 

compare it with the baseline option. The baseline option 

is treating rinsewater in the on-site wastewater treatment plant, discharging the treated effluent to a sewer, 

and disposing of sludge at an off-site permitted facility. 

The cost analysis will estimate the time (years) required 

to pay back the cost of purchasing and installing the 

electrodialysis system, based on the annual O&M savings realized. 

For this test, the electrodialysis system was operated in 

a user’s plant for three months to generate performance 

and cost data. The plant’s historical records were used 

to estimate the wastewater treatment costs, fresh water 

supply, and chemical costs prior to the installation of the 

electrodialysis system. Process water makeup, energy 

costs and maintenance costs were monitored during the 

test. 

The short-term nature of testing limits the direct observation of long-term maintenance costs, which may be 

significant due to relatively high maintenance requirements. Also, the testing was conducted at one nickelplating operation; costs incurred during installation and 

O&M savings may differ between users operating the 

electrodialysis system at other facilities. 

B.2 Describing the Design Basis 

The next element is to describe the design basis of the 

technology. The equipment specifications and operating 

parameters for the electrodialysis system and the baseline plating operation are presented in Table B-1. 

B.3 Estimating Capital Investment 

The next element is to determine the capital investment 

for the electrodialysis system. Table 2-1 in Section 2 of 

this document provides a checklist of capital items. For 

this example, the relevant capital items that apply include 

the cost of the purchased equipment (electrodialysis unit 

and associated pumps), installation (labor, materials), 

and startup/training (labor, materials). The source of the 

cost data should be provided so that the user can verify 

the information or compare the data with other cost estimates. For this case study, costs incurred during the 

purchase, installation, and startup of the technology were 

tracked for the demonstration. Labor unit costs were provided by the nickel-plating operating facility. Site preparation, utility connections/systems, and buildings/land are 

not applicable for this cost analysis. Regulatory/permitting costs are relevant for the baseline option, but were 

not included in the analysis, because they could not be 

determined from plant records. Contingency costs 

21
Table B-1. Design Basis for the Electrodialysis System and Baseline (Plating) Operation

Electrodialysis System Baseline (Plating) Operation (No Rinsewater Recovery)

Annual throughput (rinsewater passing through the electrodialysis Annual throughput (rinsewater required in the plant): 1,077,500 gal/yr 

unit): 1,077,500 gal/yr 

Makeup (fresh) water: 15,000 gal/yr Fresh water supply: 1,077,500 gal/yr 

Nickel recovered from rinsewater: 171,000 lbs/yr (as nickel sulfate) Nickel sulfate lost to sludge: 180,000 lbs/yr 

Operating parameters: Two 8-hr shifts/day Operating parameters: Two 8-hr shifts/day 

5 days/week 5 days/week 

50 weeks/year 50 weeks/year 

were not included because the actual (versus budgeted) 

capital investment estimate was available from plant 

records. Table B-2 summarizes the capital investment. 

B.4 Estimating O&M Costs 

Using Table 2-2 in Section 2 as a guide, the relevant 

O&M costs were determined. Table B-3 summarizes the 

annual O&M cost. For this illustration, O&M items that 

are considered relevant include materials (nickel sulfate), utilities (water, electricity, steam), labor (maintenance), and waste management (labor, treatment of 

waste, and disposal). Therefore, items such as materials (other than nickel sulfate), utilities, labor, insurance 

associated with the normal functions of the plating operation is not included in the estimate. Regulatory compliance associated with the generation of waste is not 

included, although it can be significant. Although the unit 

was operated for three months, the costs were extrapolated to obtain an annual cost. The unit cost and amount 

required for each component were estimated based 

upon the observations made during the pilot test, discussions with the vendor, and from historical plant records. 

The estimate for wastewater treatment cost at the plant 

is shown in Table B-4. The volume of makeup water 

Table B-2. Capital Investment for Electrodialysis System 

Item 

required for electrodialysis was determined by measuring level changes in the associated tanks. The electrical 

requirements were determined by the power requirements of the associated pumps and blowers. 

B.5 Listing the Assumptions 

This element is very important because it allows users 

to verify and compare the cost data with other cost estimates. Key assumptions that impact the cost analysis, 

such as operating parameters, also should be included. 

The following assumptions were used in the case study: 

• All costs are in real (constant 2001) dollars. 

Discount rate is not used. 

• Life of unit is 10 years. 

• Labor benefits are not included in the labor unit 

cost.

• Cost of regulatory compliance associated with the 

hazardous nickel sludge generation of the baseline operation is not included. 

• Electricity costs were estimated based on power 

requirements of the individual components. Some 

Electrodialysis System 

Quantity Unit Cost Cost* 

Purchased Equipment 

Electrodialysis membrane unit 

(including evaporator) 1 $83,500 $83,500 

Installation 

Engineering Labor 

Technician Labor 

Materials (pumps, piping, valves, gauges, etc.) 

50 hrs 

100 hrs 

1 

$60/hr 

$30/hr 

$14,000 

$3,000 

$3,000 

$14,000 

Startup/Training 

Engineering Labor 

Technician Labor 

25 hrs 

200 hrs 

$60/hr 

$25/hr 

$1,500 

$5,000 

Total Capital Investment $110,000 

* For the design basis described in Table B-1. 

22
Table B-3. Annual O&M Cost for Electrodialysis System and Baseline (Plating) Operation 

Item 

Electrodialysis System 

Annual Quantity* Unit Cost 

Annual 

Cost 

Baseline Operation 

Annual Quantity* Unit Cost 

Annual 

Cost 

Materials 

Makeup water 

Chemicals, NiSO4 purchased 

Chemicals, NiSO4 recycled 

Utilities 

Water 

Steam 

Electricity 

Waste Management 

Wastewater treatment 

Maintenance 

Service contract 

Carbon change 

Evaporator cleaning 

Miscellaneous upkeep 

Total Annual O&M Cost 

15,000 gal $4.19/1,000 gal $63 – – – 

180,000 lb $1/lb $180,000 180,000 lbs $1.00/lb $180,000 

-171,000 lb $1/lb -$171,000 – – – 

– – – 1,077,500 gal $4.19/1,000 gal $4,515 

4.9 · 108 BTU $6/106 BTU $2,940 – – – 

78,600 kWh $0.118/kWh $9,275 – – – 

– – – 1,077,500 gal** $14/1,000 gal*** $15,085 

4 visits $3,000/visit $12,000 

6 events $1,020/event $6,120 

12 events $120/event $1,440 

1 $1,000 $1,000 

$41,838 

– – – 

– – – 

– – – 

– – – 

$199,600 

* For the design basis described in Table B-1.

** See Table B-4 for the estimation of this unit cost number at this plant.

*** Wastewater generated by the targeted baseline (plating) operation only. This wastewater volume is just a fraction of the total volume 

treated annually by the plant. 

Table B-4. Estimation of Wastewater Treatment Unit 

Cost at the Plant 

Item Annual Cost 

Sludge disposal $72,000 

Strip disposal $60,000 

Misc. disposal $16,000 

Labor $120,000 

Chemicals $113,000 

Maintenance $53,800 

Total wastewater treatment costs 

at the plant $434,800 

Wastewater volume treated per year 

at the plant 31,300,000 gal* 

Unit cost of water treatment/gal $14/1,000 gal 

* Includes wastewater from the baseline (plating) operation, 

as wells as from all other operations at this plant. 

components, such as recirculating pumps, operate for a fraction of the time the entire recovery 

unit is in operation and have been adjusted 

appropriately. 

• Steam costs were estimated from a requirement 

of 1,500 BTU of steam per pound of water evaporated. Observations during testing of the electrodialysis unit show 78 gal (550 lb) of water were 

lost to evaporation in one shift. This evaporative 

loss is included in the makeup water usage listed 

in Table B-3. 

B.6 Listing Key Technical Factors 

that Impact Costs 

Another important element is to identify key technical 

factors that impact costs. Technical factors impacting 

costs in this case study include the following: 

• Water supply used during the testing was relatively low in hardness (calcium and magnesium 

content). In regions where water hardness is 

higher, evaporator cleaning (maintenance) may 

be required more frequently, with the associated 

higher cost.

• The plant in which the electrodialysis unit was 

tested had enough extra space to accommodate 

the electrodialysis equipment. In smaller plants, 

additional space (about 20 ft x 30 ft x 15 ft) may 

have to be created. 

B.7 Listing the Intangible 

Benefits/Disadvantages 

The intangible benefits or disadvantages of the technology are described, using Table 2-3 in Section 2 as a 

guideline. One intangible benefit is that the plant no 

longer has the potential liability associated with storage 

and transport of hazardous (nickel) sludge to a landfill. 

One disadvantage is that close monitoring of the electrodialysis unit is necessary because the system has a 

23
tendency to foul. Also, the energy consumption of the 

electrodialysis system is relatively high compared to the 

baseline operation. 

B.8 Calculating Simple Payback Period 

To calculate the simple payback of the electrodialysis 

system, the following equation was used: 

Ø Simple ø Ø Capital investment ø 

Œpaybackœ Œ

ofor the ETV technologyœß Œ period œ = ØNet annual O & M ø (B-1) 

Œ œ o (years) ß Œ

oafter- tax savings œß 

The capital investment estimate ($110,000) is obtained 

from Table B-2. The annual savings ($157,762) in operational costs are calculated by subtracting the annual O&M 

cost of the electrodialysis system from the annual O&M 

cost of the base nickel-plating operation (Table B-3). The 

payback period for the $110,000 system is approximately 

1 year. 

24
Appendix C

Illustration of Capital Investment/O&M Cost Estimation and 

Present Value Calculation for an Energy-Efficient Water Heater

A cost evaluation report for an energy-efficient water 

heater should incorporate the eight bulleted elements 

listed in Section 4.5. A PV is calculated for the energyefficient water heater and compared with the PV of a 

conventional water heater. 

The technology used in this illustration is an energyefficient water heater for residential hot water generation. 

C.1 Defining the Cost Objective and 

Data Collection Methods 

In this example, the cost evaluation objective is to estimate the PV (i.e., life cycle) cost of the energy-efficient 

water heater, compare it with the PV of a conventional 

water heater (competing technology) in a residential setting, and estimate the savings (if any). Although the residential user was previously using a conventional water 

heater, the conventional heater is not considered a 

baseline technology because users are not expected to 

buy the energy-efficient heater until the life of his/her 

existing conventional heater is over. Therefore, the buyer’s decision depends on a comparison of the two types 

of water heaters as competing technologies. The capital 

investment required for the conventional heater is therefore a relevant cost in this evaluation. 

To generate performance and cost data, the energyefficient unit was operated at a residential home for one 

week and compared to a conventional heater (competing technology) operated under the same conditions. 

Natural gas usage, recovery efficiency, and gallons of 

water used per day were measured during the test. 

However, the short-term nature of testing does not allow 

direct observation of the expected life of the new water 

heater. The test was conducted under specific operating 

conditions; savings obtained may differ among users 

operating the new water heater under different conditions. 

C.2 Determining the Design Basis 

The next element is to describe the design basis of the 

technology. The equipment specifications and operating 

parameters for the energy-efficient water heater and the 

conventional water heater are presented in Table C-1. 

Table C-1. Design Basis for the Energy-Efficient Water Heater and the Conventional 

(Competing) Water Heater 

Energy-Efficient Water Heater 

(40 gal, 2” water-blown insulation) 

Heat-recovery efficiency: 79.9% 

Burner rate: 39,550 BTU/hr 

Pilot burner rate: 450 BTU/hr 

Setpoint temperature: 135.0°F 

Water usage: 50 gal/day 

Annual throughput (water usage): 18,250 gal/yr 

Annual natural gas use (mBTU/yr): 21.314 

Air temperature in vicinity of task: 67.5°F 

Water inlet temperature: 58°F 

Conventional Water Heater

(40 gal, 1.31 inches water-blown insulation)

Heat-recovery efficiency: 71.9% 

Burner rate: 39,550 BTU/hr 

Pilot burner rate: 450 BTU/hr 

Setpoint temperature: 135.0°F 

Water usage: 50 gal/day 

Annual throughput (water usage): 18,250 gal/yr 

Annual natural gas use (mBTU/yr): 23.919 

Air temperature in vicinity of task: 67.5°F 

Water inlet temperature: 58°F 

25
C.3 Estimating Capital Investment 

The next element is to determine the capital investment 

for the energy-efficient water heater and the conventional water heater. Table 2-1 in Section 2 of this document 

provides a checklist of capital items. For this example, 

the relevant capital items that apply include the cost of 

the purchased equipment (the water heater) and installation (labor and materials). The source of the cost data 

should be provided so that a user can verify the information or compare the data with other cost estimates. 

For this case study, a reasonable purchase price was 

used, that was based on information provided by the 

vendor. The actual purchase price will vary depending 

on where the user buys the water heater, local sales 

taxes, etc. The installation cost is the same for both 

heaters and is not included in the analysis. Site preparation, utility connections/systems, startup/training, regulatory/permitting, contingency, and buildings and land 

are not relevant and are not included in this cost analysis. Table C-2 summarizes the capital investment for the 

two technologies. 

C.4 Estimating O&M Cost 

The next element is to determine the relevant O&M 

costs of the two technologies, as described in Table 2-2 

in Section 2. The relevant O&M items for this case study 

only include utilities (natural gas). Materials, labor, waste 

management, regulatory compliance, and insurance are 

not relevant, and are not included in this cost analysis. It 

is recommended that O&M costs be reported on an 

annual basis, regardless of the length of the verification 

Table C-2. Capital Investment for Case Study 

test. The annual natural gas use is 21.314 mBTU/yr and 

23.919 mBTU/yr for the energy-efficient water heater and 

the conventional water heater, respectively (Table C-3). 

For simplicity, the unit cost for natural gas in this case 

study was estimated based on the U.S. Department of 

Energy’s (DOE) Annual Energy Outlook, which forecasts the cost of natural gas (in 1998 dollars) through 

the year 2020 (DOE, 2000). Assuming a unit of cost of 

$6.214/mBTU, the annual cost of natural gas usage is 

$132.45 for the efficient water heater and $148.64 for 

the conventional heater. Table C-3 summarizes the 

annual O&M cost. 

C.5 Listing the Assumptions 

This element is very important because it allows users 

to verify and compare the cost data with other cost estimates. Key assumptions that should be clearly stated 

when calculating net present value, annualized costs, or 

discounted payback period include: whether constant or 

nominal dollars are used (typically, constant dollars are 

recommended), the real discount rate, and when cash 

flows occur (typically at the end of the year). Other 

assumptions that impact the cost analysis, such as the 

expected life of the major equipment, also are included. 

The assumptions used in the case study are as follows: 

• Total years of analysis is 9 years, based on the 

expected life of 9 years for both types of heater.

• All costs are in constant (real) 1998 dollars. 

• The real discount rate (r) used is 6%. 

• Cash flows occur at the end of each year. 

Energy-Efficient Water Heater Conventional Water Heater 

Unit 

Item Quantity Cost Cost* Quantity Unit Cost Cost* 

Purchased equipment 

Delivery of new water heater 1 $261 $261.00 

Total Capital Investment $261.00 

1 $235.00 $235.00 

$235.00 

* Refer to the design basis in Table C-1. 

Table C-3. Annual O&M Cost for the Energy-Efficient and the Conventional Water Heaters 

Energy-Efficient Water Heater 

Item 

Annual 

Quantity Unit Cost 

Annual O&M 

Cost* 

Utilities 

Natural Gas, mBTU 21.314 $6.214 $132.45 

Total Annual O&M Cost 21.314 $132.45 

Conventional Water Heater 

Annual 

Quantity Unit Cost 

Annual O&M 

Cost* 

23.919 $6.214 $148.64 

23.919 $148.64 

* Refer to the design basis in Table C-1. 

26
� 

• The expected fuel cost over the next 9 years of 

$6.214/mBTU is based on DOE (2000). Actual 

savings will vary from user to user depending on 

the actual unit cost (price) of natural gas. The 

higher the unit cost of natural gas for the user, the 

greater the difference in PVs of the two heaters 

and the greater the savings realized. 

C.6 Listing Key Technical Factors 

that Impact Costs 

Another important element is to identify key technical 

factors that impact costs. 

• The natural gas requirement is based on an 

average inlet water temperature of 58°F and an 

ambient temperature of 67.5°F. The actual inlet 

temperature of the water will vary seasonally 

through the year, and geographically for various 

users. Users who live in regions where the average water supply temperature is lower will incur 

higher heating requirements, and therefore, 

higher natural gas usage and cost. Air temperature in the vicinity of the water heater also will 

affect its efficiency.

• Users with an annual water usage greater than 

the 18,250 gal assumed here will experience 

greater savings; similarly, users with a lower 

annual water usage will experience lesser 

savings.

C.7 Listing the Intangible 

Benefits/Disadvantages 

The intangible benefits or disadvantages of the technology should be described, using Table 2-3 of Section 2 

as a guideline. The intangible benefit for this technology 

is a cleaner environment due to reduced carbon dioxide 

(greenhouse gas) emissions and reduction in the small 

amounts of NOx and SO2 emissions. Also, savings in 

total energy consumed nationally reduce dependence 

on imported fuel (assuming saved natural gas can reduce oil imports). 

C.8 Calculating Present Value 

The PV of the capital investment and annual O&M costs 

is estimated for each year for each technology using the 

following equations in a spreadsheet format. 

PV of cashflows 

ØPV ofø Œ cashœ = CF + 

CF1 +

= 

t=n CFt (C-1) (1+ r)t 

t=0 

CF2 CFn + L + (C-2) Œ œ 0 (1+ r)1 (1+ r)2 (1+ r)n 

oflowsß 

Table C-4 presents the spreadsheet results of the PV 

analysis. By subtracting the PV cost of the efficient water 

heater ($1,161.88) from the PV cost of the conventional 

water heater ($1,246.01), the PV of the savings realized 

over the life of the water heater is $84.13. The discounted payback period is 2 years. The discounted payback period is the year in which the PV (cumulative) of 

the energy-efficient water heater becomes lower than 

the PV (cumulative) of the conventional water heater. As 

shown in Table C-4, this happens in Year 2. 

C.9 Reference 

U.S. Department of Energy. 2000. Annual Energy Outlook, DOE-E1A-0383. Washington, DC. 

Table C-4. Spreadsheet Results of the Cost Analysis: PV of the Energy-Efficient and 

Conventional Water Heaters 

Year (t) 0 1 2 3 4 5 6 7 8 9 

Energy-Efficient Water Heater 

Capital Investment ($) 261.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 

Annual O&M Cost ($) – 132.45 132.45 132.45 132.45 132.45 132.45 132.45 132.45 132.45 

Present Value ($) 261.00 124.95 117.88 111.21 104.91 98.97 93.37 88.09 83.10 78.40 

Cumulative PV ($) 261.00 385.95 503.83 615.04 719.95 818.92 912.30 1,000.38 1,083.48 1,161.88 

Conventional Water Heater 

Capital Investment ($) 235.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 

Annual O&M Cost ($) – 148.64 148.64 148.64 148.64 148.64 148.64 148.64 148.64 148.64 

Present Value ($) 235.00 140.23 132.29 124.80 117.74 111.07 104.79 98.85 93.26 87.98 

Cumulative PV ($) 235.00 375.23 507.52 632.32 750.05 861.13 965.91 1,064.77 1,158.03 1,246.01 

27
Appendix D

Cost Evaluation References

If certain cost elements for a technology application are 

not available for an ETV pilot manager, some references are available that provide typical costs or cost 

guidance to help fill in the data gaps. Three common 

and useful references in the environmental, chemical, 

and process industries are a series of unit cost books: 

Plant Design and Economics for Chemical Engineers by 

Peters and Timmerhaus (1991); The Richardson Rapid 

System for Process Plant Construction, Richardson 

Engineering Services, Inc.; and the Environmental Cost 

Handling Options and Solutions (ECHOS) books published jointly by R.S. Means Company, Inc. and 

Talisman Partners, Ltd. When ETV testing is unable to 

measure certain cost elements (e.g., maintenance or 

installation costs) directly, these references can provide 

cost ranges based on broad industry experience. The 

texts referenced in this appendix do not represent a full 

literature review; other industry-specific standard references may be used. 

Plant Design and Economics for Chemical 

Engineers, by Peters and Timmerhaus (1991) 

This book is a widely used reference in the chemical 

industry and discusses the economic and engineering 

principles involved in the design and application of processing equipment. Because environmental technologies generally involve physical-chemical or biological 

processes for removing pollutants from a feed stream or 

for chemically characterizing soil, water, or air matrices, 

the principles in this book are generally applicable. 

Although the level of discussion in this book is probably 

too thorough for most ETV applications, there are some 

interesting rules of thumb in this book. 

In the subsection titled “Purchased-Equipment Installation,” there is a table that provides typical installation 

costs for different types of equipment as a percentage of 

the purchased-equipment cost. For example, typical 

costs for installing pumps range from 25 to 60% of the 

purchase price of the pump; for metal tanks the installation cost is 30 to 60% of the price of the tank. If the 

nature of the testing or resources does not allow the 

ETV pilot to directly measure these numbers, these 

rules of thumb based on chemical industry experience 

can be used to estimate installation costs. In addition, 

these typical ranges, developed through broad industry 

experience, can serve as benchmarks to verify estimates developed by the ETV pilot manager. 

In the absence of direct measurements, an ETV pilot 

manager can use some of the other rules of thumb for 

estimating the amount and cost of peripheral equipment 

(such as piping and electrical connections) required for 

various types of equipment, estimating the maintenance 

requirements for typical equipment, and for scaling up 

equipment based on capacity. For example, for estimating maintenance costs, industry experience suggests 

that typical annual maintenance costs range from 2 to 

6% of fixed capital investment (FCI) for simple chemical 

processes, 5 to 9% of FCI for average processes under 

normal conditions, and 7 to 11% of FCI for complicated 

processes under severe operating conditions (e.g., corrosive environment or high temperatures). 

The Richardson Rapid System for Process Plant 

Construction, by Richardson Engineering 

Services, Inc. 

Another common cost estimating reference is The 

Richardson Rapid Estimating System for Process Plant 

Construction, which includes process plant construction 

estimating standards. It is similar to the cost data books 

produced by R.S. Means, Inc. and can be used to accurately estimate the cost of labor, materials, and equipment required for the installation and operation of ETV 

technologies. This reference is particularly applicable for 

technologies associated with chemical plants, manufacturing facilities, and water treatment plants, as well as 

general construction projects. 

Estimates can be made quickly by using the estimating 

standards, which presents the worker-hours, composite 

28
unit costs, and detailed line-item data developed for 

major areas such as Site Work, Mechanical and Electrical Construction, and Process Equipment. Estimating 

forms and procedures to adjust the standard estimates 

for site-specific conditions are included with each set of 

standards. 

ECHOS Books by R.S. Means Company, Inc. 

and Talisman Partners, Ltd. 

Sometimes, the ETV testing setup may not incorporate 

all the peripheral items required for installation and 

operation of the technology. For example, during the 

ETV test, a technician may measure and add chemicals 

to the process manually because it is convenient for the 

two-week period of the test and it may not be worthwhile 

investing in transfer pumps, metering instruments, and 

piping to add chemicals on a continuous basis. However, during actual operation in a user’s facility, the user 

typically may be expected to install an automated chemical feed system. In this case, the cost of the technology 

should represent the typical use scenario. The ECHOS 

volumes Environmental Remediation Cost Data 2001— 

Assemblies Cost Book and Environmental Remediation 

Cost Data 2001—Unit Cost Book published by R.S. 

Means Company, Inc., with Talisman Partners, Ltd., are 

good references for supplementing the cost data collected during the ETV demonstration for items such as 

pumps, piping, instruments, and tanks. These volumes 

contain detailed unit price estimates of more than 4,000 

assembly cost elements for labor, site demolition, site 

preparation, site improvement, site civil/mechanical utilities, site electrical utilities, and environmental restoration activities. 

Other cost data books published solely by R.S. Means 

Company that pilots may find helpful include: 

• Means Building Construction Cost Data 2001 

• Means Electrical Cost Data 2001 

• Means Facilities Construction Cost Data 2001 

• Means Mechanical Cost Data 2001 

• Means Plumbing Cost Data 2001. 

These cost guides can be used by pilot managers to 

save time in researching the cost of many of the peripheral equipment and materials needed for the installation 

and operation of the technology by a typical user. The 

prices of materials, labor, and equipment within these 

databases have been compiled based on a large number of quotes from different manufacturers and can be 

used in the absence of direct quotes from the manufacturers of such peripherals. 

Other Cost Estimation References 

Waste Treatment Technologies 

United States Environmental Protection Agency. 1995. 

Detailed Costing Document for the Centralized Waste 

Treatment Industry. Office of Water. EPA-821-R-95-002. 

January. 

Air Pollution Control 

United States Environmental Protection Agency. 1996. 

OAQPS Control Cost Manual, Fifth Edition Office of Air 

Quality Planning and Standards, Research Triangle 

Park, NC. EPA-453-B-96-001. February. 

Process and Utility Industries 

American Association of Cost Engineers (AACE, Inc.). 

1990. AACE Recommended Practices and Standards 

for Cost Estimation, Cost Control, Planning and Scheduling, and Project Management. November. 

29
Appendix E

Time Value of Money Table

30
31

Table E-1. Present Value of Annuity Factors* Calculated for Different Discount Rates (r) and Number of Years (n) 

Discount Rate (r) 

Number of 0.5% 1% 1.5% 2% 3% 4% 5% 6% 7% 8% 10% 12% 15% 20% 25% Years (n) 

1 0.99502 0.99010 0.98522 0.98039 0.97087 0.96154 0.95238 0.94340 0.93458 0.92593 0.90909 0.89286 0.86957 0.83333 0.80000 

2 1.98510 1.97040 1.95588 1.94156 1.91347 1.88609 1.85941 1.83339 1.80802 1.78326 1.73554 1.69005 1.62571 1.52778 1.44000 

3 2.97025 2.94099 2.91220 2.88388 2.82861 2.77509 2.72325 2.67301 2.62432 2.57710 2.48685 2.40183 2.28323 2.10648 1.95200 

4 3.95050 3.90197 3.85438 3.80773 3.71710 3.62990 3.54595 3.46511 3.38721 3.31213 3.16987 3.03735 2.85498 2.58873 2.36160 

5 4.92587 4.85343 4.78264 4.71346 4.57971 4.45182 4.32948 4.21236 4.10020 3.99271 3.79079 3.60478 3.35216 2.99061 2.68928 

6 5.89638 5.79548 5.69719 5.60143 5.41719 5.24214 5.07569 4.91732 4.76654 4.62288 4.35526 4.11141 3.78448 3.32551 2.95142 

7 6.86207 6.72819 6.59821 6.47199 6.23028 6.00205 5.78637 5.58238 5.38929 5.20637 4.86842 4.56376 4.16042 3.60459 3.16114 

8 7.82296 7.65168 7.48593 7.32548 7.01969 6.73274 6.46321 6.20979 5.97130 5.74664 5.33493 4.96764 4.48732 3.83716 3.32891 

9 8.77906 8.56602 8.36052 8.16224 7.78611 7.43533 7.10782 6.80169 6.51523 6.24689 5.75902 5.32825 4.77158 4.03097 3.46313 

10 9.73041 9.47130 9.22218 8.98259 8.53020 8.11090 7.72173 7.36009 7.02358 6.71008 6.14457 5.65022 5.01877 4.19247 3.57050 

11 10.67703 10.36763 10.07112 9.78685 9.25262 8.76048 8.30641 7.88687 7.49867 7.13896 6.49506 5.93770 5.23371 4.32706 3.65640 

12 11.61893 11.25508 10.90751 10.57534 9.95400 9.38507 8.86325 8.38384 7.94269 7.53608 6.81369 6.19437 5.42062 4.43922 3.72512 

13 12.55615 12.13374 11.73153 11.34837 10.63496 9.98565 9.39357 8.85268 8.35765 7.90378 7.10336 6.42355 5.58315 4.53268 3.78010 

14 13.48871 13.00370 12.54338 12.10625 11.29607 10.56312 9.89864 9.29498 8.74547 8.24424 7.36669 6.62817 5.72448 4.61057 3.82408 

15 14.41662 13.86505 13.34323 12.84926 11.93794 11.11839 10.37966 9.71225 9.10791 8.55948 7.60608 6.81086 5.84737 4.67547 3.85926 

16 15.33993 14.71787 14.13126 13.57771 12.56110 11.65230 10.83777 10.10590 9.44665 8.85137 7.82371 6.97399 5.95423 4.72956 3.88741 

17 16.25863 15.56225 14.90765 14.29187 13.16612 12.16567 11.27407 10.47726 9.76322 9.12164 8.02155 7.11963 6.04716 4.77463 3.90993 

18 17.17277 16.39827 15.67256 14.99203 13.75351 12.65930 11.68959 10.82760 10.05909 9.37189 8.20141 7.24967 6.12797 4.81219 3.92794 

19 18.08236 17.22601 16.42617 15.67846 14.32380 13.13394 12.08532 11.15812 10.33560 9.60360 8.36492 7.36578 6.19823 4.84350 3.94235 

20 18.98742 18.04555 17.16864 16.35143 14.87747 13.59033 12.46221 11.46992 10.59401 9.81815 8.51356 7.46944 6.25933 4.86958 3.95388 

22 20.78406 19.66038 18.62082 17.65805 15.93692 14.45112 13.16300 12.04158 11.06124 10.20074 8.77154 7.64465 6.35866 4.90943 3.97049 

24 22.56287 21.24339 20.03041 18.91393 16.93554 15.24696 13.79864 12.55036 11.46933 10.52876 8.98474 7.78432 6.43377 4.93710 3.98111 

26 24.32402 22.79520 21.39863 20.12104 17.87684 15.98277 14.37519 13.00317 11.82578 10.80998 9.16095 7.89566 6.49056 4.95632 3.98791 

28 26.06769 24.31644 22.72672 21.28127 18.76411 16.66306 14.89813 13.40616 12.13711 11.05108 9.30657 7.98442 6.53351 4.96967 3.99226 

30 27.79405 25.80771 24.01584 22.39646 19.60044 17.29203 15.37245 13.76483 12.40904 11.25778 9.42691 8.05518 6.56598 4.97894 3.99505 

n 1 

t 

� 

=1

* The numbers in this table represent the values of . (1+ r)t 
Appendix F

Unit Annualized Cost

The unit annualized cost is calculated by dividing the 

total annualized cost by the annual throughput (Equation F-1). As described in Section 4.1, the total annualized cost of a technology application is calculated by 

summing the annualized capital investment and the 

annual O&M costs associated with a technology for a 

given design basis. 

Total annualized cost Unit annualized cost = (F-1) Annual throughput 

The annual throughput could be the gallons of wastewater treated, the number of samples analyzed, etc. 

Unit annualized cost is easy to understand and provides 

a quick way of comparing several technologies. For 

example, in the case of a new field characterization tool, 

potential users could quickly compare the cost per sample for the new field screening tool with the cost per 

sample incurred by sending samples to an off-site laboratory for analysis. However, because unit annualized 

cost depends on the design basis (i.e., equipment capacity, annual throughput), unit annualized cost also is 

the most likely to be misinterpreted. For example, a new 

water treatment unit may claim to treat water at a unit 

cost of $0.50/gal. But this may be based on the assumption that the new equipment will be sized and applied to 

a plant that treats 1,000,000 gal of water per year. For 

smaller users, who do not have the benefits of such 

economies of scale, the unit costs could be much higher. 

If the unit annualized costs of the two technologies are 

being compared, the pilot managers should ensure that 

estimates for both technologies were prepared on the 

same design basis. 

Potential users may take the unit annualized cost number presented for the ETV technology and extrapolate it 

in a proportionate (linear) fashion to various levels of 

throughput. One way to avoid this misinterpretation is to 

present a graph of unit annualized cost versus throughput. Instead of presenting a single unit cost number, this 

graph allows potential users to estimate costs and compare technologies based on their anticipated throughput. 

Figure F-1 is an illustration of unit annualized cost versus throughput. 

Figure F-1. Illustration of Unit Annualized Cost 

versus Throughput 

32