Revealing the Iceberg under Sea Surface: Life Cycle Cost Matters!

We associate the “iceberg principle” in general with psychological analysis of individuals, the principle, however, can also be applied to the energy sector for economic analysis. Energy-saving technology investment is like an iceberg. Decision-makers tend to pay more attention to initial capital expenditures (CAPEX), represented by the part of the iceberg that floats above the surface of the water, and operational expenditures (OPEX) hidden under the water are often overlooked and neglected. The Life Cycle Cost-Benefit Analysis Method (LCCBA) provides an intuitive and systematic way to demonstrate the economic and energy performance of projects in the area of energy efficiency, energy efficiency retrofit, renewable energies and energy generation over the entire life cycle.

On November 6-7, the second training workshop on life cycle cost-benefit analysis was successfully held in Beijing, organized jointly by the National Energy Conservation Center (NECC) and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH. Mr. Jan Bleyl, General Manager of Energetic Solutions was invited once again as the lecturer for the training, while dozens of senior practitioners from China’s energy saving industry joined the training workshop. During the two-day training Mr. Jan Bleyl gave a comprehensive and systematic introduction to the life cycle cost benefit analysis (LCCBA) method, including theoretical knowledge, dynamic economic analysis methods, important economic indicators and the practical use of a simplified LCCBA calculation tool.

During the final session of the training, Mr. Bleyl and the trainees applied the LCCBA tool to calculate the costs of an integrated heating and cooling project, provided by one of the participants as an example from everyday practice.  With entering specific parameters, the LCCBA tool quickly calculated and displayed the economic indicators of the sample project such as present value, investment duration, internal rate of return, etc. The introduction of the life cycle cost analysis concept and tools is also part of the Sino-German demonstration project on energy efficiency for energy-intensive industry, which aims to help Chinese industrial companies to make better energy-related investment decisions. As follow-up activity of the first training on life cycle cost in 2018, this training also aimed at “train the trainers”, through which a Chinese  localized training system in this area is expected to be established and the LCCBA concepts and calculation methods in the energy sector can be widely disseminated in China in the near future.

Sino-German Energy Partnership

The Sino-German Energy Partnership links three levels of action: high-level policy dialogue, business-to-government exchange and an exchange of experiences on technical and regulatory solutions that promote the energy transition. The main aim of the partnership is to foster and advance the far-reaching and profound energy transitions ongoing in both China and Germany by exchanging views, best practices and knowledge on the development of a sustainable energy system, primarily centered on improving energy efficiency and expanding the use of renewable energy.