Nina Manig Leibniz Universität Hannover Training financed by GIZ - BMZ Exercise: Calculations on Economic Efficiency of DWWM and Water Reuse Systems Nina Manig Leibniz Universität Hannover Training financed by GIZ - BMZ

Program today 9:15 – 10:45 Economic Efficiency of Water Reuse Nina Manig (Leibniz Universität Hannover)  Presentation of basics of engineering economics 11:15 – 12:00 Case Study: Reuse in Agriculture of the Northern Jordan Valley Horst Reinhardt (GITEC Consult GmbH)  Presentation of results from a case study 13:00 – 14:30 Exercise: Calculations on Economic Efficiency of DWWM and Water Reuse Systems  Exercises in small groups

Project (example): Decentralized or centralized wastewater management in a rural area (DWWM or CWWM) Question: Of the decision-relevant alternatives available, which would you recommend from an economic point of view? Project example is based on DWA (2012): Leitlinien zur Durchführung dynamischer Kostenvergleichsrechnungen (KVR-Leitlinien), 8. überarbeitete Auflage Note: The project example do not imply universal validity or across-the-board applicability. Purely mechanistic transfer of the sample calculation is not recommended.

1. Project definition In a rural area with 45 houses a wastewater management system is to be planned and designed. With an assumed number of inhabitants per house of 3 inhabitants, the rural area has 135 PE. A significant increase of the population is not expected. There is a receiving water. There are no special requirements regarding the treatment performance.

2. Description of project alternatives There are three decision-relevant alternatives under discussion: Alternative 1: Decentralized system with the use of septic tanks Septic tanks (biological treatment) will be build close to each house with a minimum design capacity of 4 PE/housing unit greater than 50 m² resulting in a treatment capacity of 180 PE. Additionally, connecting pipes (average length = 25 m) have to be build but no further transport sewers have to be build.

2. Description of project alternatives There are three decision-relevant alternatives under discussion: Alternative 2: Centralized system with a pond system A sewer system will be build to transport the wastewater into a pond system (with aeration) outside the village. The pond will be build with a capacity of 150 PE. Aerated pond system

2. Description of project alternatives There are three decision-relevant alternatives under discussion: Alternative 3: Connection to an existing WWTP A sewer system and a connecting gravity pipe (ca. 50 km) will be build to transport the wastewater to an existing WWTP (45,000 PE). There is no upgrade of the WWTP necessary, but parts of the reinvestment costs (for 135 PE) will be incurred. ca. 50 km Existing WWTP

2. Description of project alternatives A1: Decentralized system with septic tanks A2: Centralized system with a pond system A3: Connection to an existing WWTP ca. 50 km Existing WWTP Aerated pond system

3. Applicability of the cost comparison method The three alternatives A1, A2, A3 ensure the wastewater treatment of the small village. All alternatives have different cost structures: A1 has low investment costs, but high operational costs. Compared to A1, A2 and A3 have low operational costs but significant higher investment costs. The treatment facilities of the three alternatives have different lifetimes resulting in different reinvestments. Dynamic cost comparison method can be used to determine the most advantageous solution in relation to costs out of the three decision-relevant alternatives having the same use! Here: Calculation and comparison of project cost present values

4. Cost finding Investment costs of all alternatives are determined on the basis of already completed and comparable constructions and specific costs (divided in structural/construction engineering and mechanical/electro-engineering) Operational costs are mainly personnel, maintenance, energy and sludge disposal costs.

Alternative 1 Septic tanks Alternative 3 Existing WWTP 4. Cost finding Cost category Alternative 1 Septic tanks Alternative 2 Pond system Alternative 3 Existing WWTP Investment costs Sewer system - 302,250 EUR 947,750 EUR Treatment facilities (construction) 244,500 EUR 150,000 EUR later additional reinvestments (40,500 EUR) Mechanical/electro engineering 90,000 EUR Sum investment costs 334,500 EUR 602,250 EUR Running costs Operational costs 27,000 EUR/a 9,100 EUR/a 6,550 EUR/a Sum running costs

5.1 Calculation parameters Average lifetimes of different plant components have been set to: 50 years for gravity sewers and connecting transport pipe 25 years for septic tanks, pond system, existing WWTP (part of reinvestment costs will be incurred) 12.5 years for mechanical and electro technical equipment The period of analysis spans 50 years. Investment period is one year; reference point for the determination of present values is the commissioning date of the plants at the end of the investment year. Interest rate: Group 1: i = 2.0 % (0.02) in p.a. Group 2: i = 3.0 % (0.03) in p.a. Group 3: i = 5.0 % (0.05) in p.a.

5.2 Calculation of project cost present values Exercises: Plot cost series (cash flow diagram) for each alternative Use cost conversion factors to: convert one individual cost item (= investment and re- investment costs) into a cost present value convert of uniform cost series (= running costs) into a cost present value Calculate the of overall project cost present value for each alternative and compare the results  Which alternative would you recommend from an economic point of view?

Results: Cost series of all alternatives A1: Decentralized system with septic tanks 90,000 EUR 244,500 EUR 90,000 EUR 90,000 EUR 90,000 EUR 244,500 EUR 27,000 EUR/a 12.5 Years 37.5 25 50 Reference point

Sought: Present value of cost item Conversion factors Conversion of one individual cost item into a cost present value DFACIC - Discounting FACtor for an Individual Cost item Reference point Given: Individual cost item Sought: Present value of cost item 1 n Years 2 DFACIC (i, n) = 𝟏 𝟏+𝐢 𝐧

Sought: Present value of the cost series Conversion factors Conversion of uniform cost series into a cost present value DFACS - Discounting FACtor for uniform Series Reference point Sought: Present value of the cost series 1 n Years 2 n-1 Given: n equal cost items DFACS (i, n) = 𝟏+𝐢 𝐧 −𝟏 𝒊∙ 𝟏+𝐢 𝐧

Results: Cost series of all alternatives A2: Centralized system with a pond system 150,000 EUR 150,000 EUR 150,000 EUR 150,000 EUR 150,000 EUR 150,000 EUR 302,250 EUR 9,100 EUR/a 12.5 Years 37.5 25 50 Reference point

Results: Cost series of all alternatives A3: Connection to an existing WWTP 947,750 EUR 40,500 EUR 6,550 EUR/a 12.5 Years 37.5 25 50 Reference point

Results: Cost present values (rounded) A1: Decentralized system with septic tanks Cost category i = 2 % i = 3 % i = 5 % Conversion factor /Present value Conversion factor / Present value Investment costs 334,500 EUR Reinvestment after 12.5 a 0.78072 0.69109 0.54342 90,000 * DFACIC (i, 12.5) 70,300 EUR 62,200 EUR 48,900 EUR Reinvestment after 25 a 0.60953 0.47761 0.29530 334,500 * DFACIC (i, 25) 203,900 EUR 159,800 EUR 98,800 EUR Reinvestment after 37.5 a 0.47588 0.33007 0.16047 90,000 * DFACIC (i, 37.5) 42,800 EUR 29,700 EUR 14,400 EUR Operational costs 31.4236 25.7298 18.2559 27,000 * DFACS (i, 50) 848,400 EUR 694,700 EUR 492,900 EUR Project present value 1,499,900 EUR 1,280,900 EUR 989,500 EUR

Results: Cost present values (rounded) A2: Centralized system with a pond system Cost category i = 2 % i = 3 % i = 5 % Conversion factor /Present value Conversion factor / Present value Investment costs 602,300 EUR Reinvestment after 12.5 a 0.78072 0.69109 0.54342 150.000*DFACIC (i, 12.5) 117,100 EUR 103,700 EUR 81,500 EUR Reinvestment after 25 a 0.60953 0.47761 0.29530 300,000 * DFACIC (i, 25) 182,900 EUR 143,300 EUR 88,600 EUR Reinvestment after 37.5 a 0.47588 0.33007 0.16047 150,000*DFACIC (i, 37.5) 71,400 EUR 49,500 EUR 24,100 EUR Operational costs 31.4236 25.7298 18.2559 9,100 * DFACS (i, 50) 286,000 EUR 234,100 EUR 166,100 EUR Project present value 1,259,700 EUR 1,132,900 EUR 962,600 EUR

Results: Cost present values (rounded) A3: Connection to an exiting WWTP Cost category i = 2 % i = 3 % i = 5 % Conversion factor /Present value Conversion factor / Present value Investment costs 947,800 EUR Reinvestment after 25 a 0.60953 0.47761 0.29530 40,500 * DFACIC (i, 25) 24,700 EUR 19,300 EUR 12,000 EUR Operational costs 31.4236 25.7298 18.2559 6,550 * DFACS (i, 50) 205,800 EUR 168,500 EUR 119,600 EUR Project present value 1,178,300 EUR 1,135,600 EUR 1,079,400 EUR

Results: Cost comparison Interest rate: 2 % Alternative Project cost present value Relation in % A1: Septic tanks 1,499,900 EUR 127 % A2: Pond system 1,259,700 EUR 107 % A3: Existing WWTP 1,178,300 EUR 100 % Interest rate: 3 % Alternative Project cost present value Relation in % A1: Septic tanks 1,280,900 EUR 113.1 % A2: Pond system 1,132,900 EUR 100 % A3: Existing WWTP 1,135,600 EUR 100.2 %

Results: Cost comparison Interest rate: 5 % Alternative Project cost present value Relation in % A1: Septic tanks 989,500 EUR 103 % A2: Pond system 962,600 EUR 100 % A3: Existing WWTP 1,079,400 EUR 112 %

Results Lower interest rate (< 3 %): A3 is more cost-effective. Higher interest rate (> 3 %): A2 is more cost-effective.

Thank you for your attention! Contact: Nina Manig Institute for Sanitary Engineering and Waste Management Leibniz Universität Hannover manig@isah.uni-hannover.de