Technical Briefing – Cost Analysis Summary
Download the French version of the cost analysis briefing here: Technical briefing_Life Cycle Cost analysis-fr
Economic considerations are important when comparing alternative pumping methods. In many cases hydrological, or climatological factors will limit the kind of pumping system that can be used. Where alternatives exist, the evaluation of the alternatives must include both economic and technical analysis.
There are 2 concepts to be understood before taking any economic assessment:
- Payback period: the length of time required for the initial investment to be repaid by the benefits gained.
- Life Cycle costs: the sum of all costs and benefits associated with the pumping system over its lifetime (or over a selected period of analysis), expressed in present day money. This is called the Present Worth or the Net Present Value of the system. For the system to be worthwhile, the benefits must be greater than the costs.
The most complete approach to economic appraisal is to use the life cycle cost analysis because all future expenses are then taken into account.