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Specific net present value: an improved method for assessing modularisation costs in water services with growing
1Eawag, Swiss Federal Institute of Aquatic Science and Technology, Dübendorf, Switzerland. max.maurer@eawag.ch
Water Research
|March 11, 2009
Summary
A new specific net present value (SNPV) method optimizes economic engineering decisions by considering growth and utilization. SNPV favors cost-effective solutions per service unit, especially for modular and on-site treatment systems.
Area of Science:
- Economic Engineering
- Environmental Economics
- Water Resource Management
Background:
- Standard net present value (NPV) methods often exclude crucial factors like growth rate and plant utilization.
- Accurate economic evaluation is vital for infrastructure investments, particularly in water treatment.
Purpose of the Study:
- Introduce and validate a specific net present value (SNPV) approach for economic engineering decisions.
- Compare the economic feasibility of modularization and on-site treatment (OST) systems using the SNPV method.
Main Methods:
- Developed the specific net present value (SNPV) criterion, incorporating average costs, growth rate, and plant utilization.
- Applied SNPV to case studies involving modularization and on-site treatment (OST) systems.
- Analyzed the influence of demand growth and economies of scale on average costs.
Main Results:
- SNPV favors alternatives with lower costs per service unit, aligning with user cost coverage.
- Demand growth significantly impacts average costs, similar to economies of scale.
- Calculations quantified acceptable additional costs for modularization and comparable costs for OST.
- Identified small systems with high growth and interest rates as prime markets for OST.
Conclusions:
- The SNPV approach is effective for comparing OST systems across different scenarios.
- Operating expenses are a key economic challenge for membrane-based wastewater OST.
- High demand growth justifies up to 100% additional investment in modularization and staged expansion.
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