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analysis has been prepared. This will prevent misunderstandings arising because of the selection of an appraisal review period which may not necessarily reflect the refurbishment costs for each option in the particular year in which they will ultimately be incurred. However, extending the review period to cover the whole of the major cost cycle resolves this presentational difficulty and this is the approach adopted in the economic appraisal procedure described.

The scheme owner should appreciate fully the recurring nature of the respective cost cycles if they wish to maintain an ongoing viable system, and consideration can be given to the development of a separate fund to be set aside during the initial life expectancy of the equipment to provide for its eventual replacement.

It could be suggested that where the review period is less than the full cycle of any major component part of the system, this could lead to confusion and misunderstanding in interpreting the financial implications. For example, it might be suggested that credits should be made in calculations in respect of the unexpired life element of any particular component of the system at the end of the review period. This would, however, undoubtedly cause confusion since it appears unlikely that any sum so credited would be realised should the system be terminated at that time and therefore the capital cost of operating the system for the review period would be in excess of the sum arrived at by that principle.

Alternative calculations can also be made on the basis of lease rentals for the review period, but this may be open to confusion because it may not recognise the ongoing leasing cost commitment for the unexpired period of asset life on items such as mains and meters, etc, beyond the review period. Obviously, an ongoing liability would be present even if the system were terminated at that point.

It is essential that the presentation of investment appraisal information clearly demonstrates the capital costs of providing a viable and ongoing system for each of the options under consideration. It is clearly important to emphasise the recurring nature of the capital costs involved and the presentation of information is somewhat complicated by the differing useful lives of the major component elements within the systems. A cycle of cost based on the major asset life expectancy must, therefore, be established in order to assist in determining the true cost of providing an ongoing long-term system.

In conclusion, it is important to appreciate that certain technically feasible options may be eliminated by political, legal or financial constraints.

CHAPTER 7: REFERENCES

1). BS 8211, part 1: British Standard Code of Practice on the Energy Efficient Refurbishment of Housing Applications Manual; part 1 ‘Energy Efficient Refurbishment of Housing’ British Standards Institution, Chiswick High Road, London.

2). Programme of Research, Development and Demonstration on District Heating; 1987, Technical and Economic Assessment of New Distribution Technology

3) Community Heating: UK Action Plan by Gill Owen. CHPA, 1992. World Energy Council

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