Business Case – Low complexity V18
Project information
Project name
Boiler Phase-out – Pool Heating
Project type
Building
Enterprise PPM
27594
(Sentient) ID#
Programme name
Regional Improvement Programmes
Programme Sentient
27076
ID #
Project complexity
Low
rating (PCAT)
Author and date
Kirk Archibald
Executive Investment TBC
Summary (EIS)
Project budget
$981,450
requested
Financial year
FY 19-20
requested from
Estimated start and
1 February 2020 – 1 August 2020
finish date
Document control
The
purpose of this business case is to request funding from the Sustainability Fund to install heat
pumps for pool heating at Moana-nui-a-kiwa and Westwave Leisure Centres
Document history
Version
Date
Updated by
Update details
V3
10/12/2019
Kirk Archibald
Westwave and Moana-Nui-a-Kiwa Projects
Strategic case (Case for change)
Introduction
Background
Auckland Council’s aquatic centres are responsible for 85% of Auckland
Council’s natural gas usage which in-turn is responsible for 23% of
Auckland Council’s greenhouse gas (GHG) emissions. Auckland Council
has declared a climate emergency and set targets to limit warming to
1.5°C. In effect this means reducing GHG emissions to net zero by 2050
– this wil require phasing out all-natural gas consumption.
New Zealand’s gas reserves are declining and with the ban on offshore
gas exploration, current levels of demand are unlikely to be sustainable.
Combined with projected increases in carbon costs, gas prices are
expected to rise substantially. Genesis is already predicting price
increases of 40% when our current contract expires at the end of 2020.
Opportunity/problem
Water heating from heat pumps releases over 80% less GHG emissions
when compared to existing gas heating systems.
In addition, water heating from heat pumps costs less on a whole of life
basis than existing gas heating systems.
Auckland Council has 36 boilers installed across 20 aquatic centres. As
boilers have a useful life of 20 – 30 years, there are a couple of
renewables each year. Capital budgeted for these renewables can of set
the cost of installing heat pumps (as is the case for the Westwave Main
1 | P a g e
Business Case – Low complexity v18
Strategic Portfolio and Programme Office (SPO)
Feedback –
Mail us
Business Case – Low complexity V18
Introduction
pool where the boilers are 31 years old).
Objectives
This project wil install heat pumps to heat all pools at Moana-Nui-a-Kiwa
Leisure Centre and the main and dive pools at Westwave. These two
projects wil be pilots for a wider roll-out across the portfolio from FY 2020
/ 2021
High level benefits
GHG reduction of 510 tonnes per year and OPEX reduction of $93,000
per year. Of sets CAPEX spend of $255,000 on replacement boilers
(Westwave).
Alignment to strategy
Auckland Plan Outcomes - Tick all that apply ()
Belonging and participation
☐
Transport and access
☐
Māori identity and well-being
☐
Environment and cultural heritage
☒
Homes and places
☐
Opportunity and prosperity
☐
Describe strategic link above in more detail:
Our 6 Steps up - Tick all that apply ()
Engage and enable communities
☐
Quality advice and support for elected
☐
members
Smart and easy for customers
☐
Better value for ratepayers and residents ☒
Value and empower our people
☐
Make the most of our size and scale
☐
Describe the link to steps up selected above in more detail:
Alignment to existing
Auckland Climate Action Framework (ACAF) – Key Move 10
programmes:
Auckland Council GHG Emission Reduction Plan
Mayors Annual Plan Proposal (wider roll-out)
Constraints
Funding, asset condition, site electrical capacity and feasibility of
integrating heat pumps (wider roll-out)
Dependencies
Mayors Annual Plan Proposal (wider roll-out)
Assumptions
Māori Outcomes – Select one if relevant ()
Marae development
☐
Rangatahi - Youth
☐
Te Reo Māori
☐
Māori Housing and Papakāinga
☐
Economic development
☐
Organisational Effectiveness
☐
Kaitiakitanga - Water
☐
Māori Participation
☐
Māori Identity and Culture
☐
Māori responsiveness
Health, safety and
Standard health safety and wellbeing requirements for worksites &
wellbeing
working with gas and electricity
High level risks and
Heavy equipment at height, electrical shock
issues
Economic case (Determining value for money)
In Scope
Installation of heat pumps for water heating at Moana-nui-a-kiwa and Westwave Leisure Centre (main
and dive pools only) & energy efficiency opportunities identified through the design process
Out of scope
Use of heat pumps for air heating and domestic hot water
2 | P a g e
Business Case – Low complexity v18
Strategic Portfolio and Programme Office (SPO)
Feedback –
Mail us
Business Case – Low complexity V18
Outline options analysis
Option
Description
Option 1 – Do nothing /
Boilers are replaced at end of life with non-condensing boilers.
Business as Usual
While this option requires the least amount of CAPEX it has the
highest OPEX cost and highest cost on a whole of life basis. This
option leaves Council with the highest level of exposure to gas and
carbon price rises.
Option 2 – Replace gas boilers Like above however additional CAPEX required. GHG emissions
with condensing gas boilers at and OPEX wil be around 15% lower.
end of life
Option 3 – Replace gas boilers There is a good return on investment for installing heat pumps to
with heat pumps at end of life
heat pools now. Waiting until gas boilers are at end of life means
that the benefits of action now wil not be realised until as far out as
2050 as boilers have a lifespan of 20 – 30 years.
Option 4 – Install heat pumps
This option has the lowest whole of life costs and wil result in a
for water heating. Replace gas 64% reduction in emissions at Moana-nui-a-kiwa and an 81%
boilers with heat pumps at end reduction in GHG emissions for heating the main pool and dive
of life.
pool at Westwave. Remaining gas use at Moana-nui-a-kiwa will be
phase out when the existing boiler is replaced or when the
economics of switching air heating and hot water permit.
Option 5 – Replace all heating This option is challenging as it would require re-use of the existing
with heat pumps.
heating infrastructure which is designed for boilers and higher
operating temperatures than heat pumps typically supply. The cost
of doing this wil be higher than the other options as additional heat
pump capacity wil be required along with additional consultancy for
the design. Higher operating temperatures for heat pumps also
tend to reduce the reliability and operating life of the heat pumps so
maintenance costs are expected to be higher.
Preferred option
Option 4 – Provides the lowest whole of life costs and emission reductions at the lowest cost
Benefits tables
Financial Benefits
Benefit
Measurement Benefit
Benefit Type Baseline
Approved
Cost centre
statement
metric &
Owner
Value
benefit &
& GL code
method
achievement
date
Reduction in Utility
Community
Financial
Will be
utility costs
consumption
Facilities
defined by
and costs
OMMU
IPMVP
verified using
reporting
IPMVP
Benefit owner signature
Agnes McCormack
Date signed
*Note: If there are additional benefits, add extra rows, with a Benefit owner signature line after each
benefit.
3 | P a g e
Business Case – Low complexity v18
Strategic Portfolio and Programme Office (SPO)
Feedback –
Mail us
Business Case – Low complexity V18
Non-financial Benefits
Benefit
Measurement
Benefit Owner
Benefit Type
Baseline Value Approved benefit
statement
metric &
& achievement
method
date
Reduction in
Reduction in
Carbon
Non-financial
6300 tonnes
GHG emissions GHG emissions Management
(33 GWh
from gas minus Steering Group
natural gas x
the increase in
192 tonnes
GHG emissions
CO2 / GWh)
from electricity
Benefit owner signature
Ian Maxwel
Date signed
*Note: If there are additional benefits, add extra rows, with a Benefit owner signature line after each
benefit.
Non-quantifiable Benefits and additional information
Commercial case (Procurement of preferred option)
Detailing the procurement strategy
Moana-nui-a-kiwa – Direct sourced from Citycare as under $300,000
Westwave – Closed tender as cost likely to be $500,000 - $600,0000
Risk Description
Mitigation
Date
Owner
Identified
Required electrical capacity
Monitoring prior to project start. 12/12/2019 Kirk Archibald
not available (Moana-nui-a-
Reduce scope of project to
kiwa only)
stay within site capacity or add
additional capacity, business
case wil be updated and
resubmit ed.
Issue Description
Resolution
Resolution Owner
Date
Financial case (Affordability & funding)
Financial analysis
Projects at both Moana-nui-a-kiwa and Westwave have a positive NPV and IRR’s of 9 – 10%, well
above that of Auckland Council’s cost of Capital.
Financial sources
Sustainability Fund
Overal affordability
The cost of the proposed option is within the budget of the sustainability fund and in the long term, the
reduction in gas costs wil outweigh the higher upfront capital.
Heat pumps have been assessed against natural gas.
4 | P a g e
Business Case – Low complexity v18
Strategic Portfolio and Programme Office (SPO)
Feedback –
Mail us
Business Case – Low complexity V18
Other options for heating include solar hot water, electric resistance heating, wood chip / biomass and
LPG or Diesel.
• LPG and Diesel were not assessed as they are more expensive than Natural Gas (CAPEX
and OPEX) and emit more GHG emissions.
• Solar Hot Water was not assessed as solar PV is likely to be a more cost-effective use of roof
space.
• Electrical resistance heating was not investigated as there is insufficient electrical capacity to
supply the required heating.
Contingency
Moana-nui-a-kiwa - ±10% as firm pricing has been received from Citycare for this work
Westwave - ±20% as firm pricing has not been received and further detailed design is required
Management case (Stakeholder, resource and change support delivery
plan)
Key stakeholders
The following stakeholder groups wil be impacted by this change in the following ways:
Stakeholder name / group /
Evidence of collaboration /
Agreed outcome
contact
impact assessment
Aquatics Team, Community
Have provided preferred
Heat pump installation will
Facilities
location for heat pumps and
require the pool to briefly be
pricing for Moana-Nui-a-Kiwa
shut down.
and Westwave.
Installing heat pumps at
Have supported supplier
Westwave wil negate the
briefings and business case
requirement to install boilers
development
and wil offset around $255,000
of CAPEX
Citycare (Moana Nui-a-Kiwa)
Has provided pricing for
Moana-Nui-A-Kiwa
Project structure
Carbon Management Steering
Group
Project Steering Committee
Supplier(s)
Aquatics Team
Ian Maxwell
Advisory Group(s)
Subject Matter Expert(s)
Benefits Owner(s)
Admin/Coordinator
Change &
Kirk Archibald
Communications
Risk Owner(s)
Deena Benjamin
Toto Vu-Duc
Team/member(s)
Project Team
5 | P a g e
Business Case – Low complexity v18
Strategic Portfolio and Programme Office (SPO)
Feedback –
Mail us
Business Case – Low complexity V18
Outline project plan
How wil this project be delivered, by who and when?
Deliverable(s)
Delivered by
Date due
Design Review & Detailed Design
TBC Contractor
28 February 2020
Delivery of installation
Moana-nui-a-kiwa – Citycare
19 June 2020
Westwave - TBC Contractor
Commissioning Review & Benefits
Energy Ef iciency and Sustainability 18 December
Realisation
Health and safety
This project is expected to include modification of an existing asset, as such the requirements of
Safety in Design wil apply to this project.
There is legal responsibility on Auckland Council (as the ‘Person Conducting a Business or
Undertaking’) to ensure, so far as is reasonably practicable, the health and safety of workers and
other persons over the life of the asset.
The following health and safety related risks were identified in the option assessment relating to this
project which wil need to be considered for elimination or where not able to be eliminated to be
minimised.
Option Health and Safety Risk
Project Phase
All
Live power cables
Delivery
Live gas lines
Delivery
Traf ic (facility car parks)
Delivery
Project execution plan
Attach completed Project execution plan to this section (Applies during Plan phase only).
Approval and acceptance
Handover activities
The following activities and documents wil be handed over once acceptance criteria have been met:
Designs, procedures, registers, maintenance manuals, templates, as built materials, post-project
benefits monitoring and realisation activities, post project evaluation etc. (attach any relevant
documentation to appendices).
6 | P a g e
Business Case – Low complexity v18
Strategic Portfolio and Programme Office (SPO)
Feedback –
Mail us
Business Case – Low complexity V18
Governance sign of Name
Signature to endorse Date
Comment
I agree that the potential costs/benefits identified are realistic, and the low complexity delivery path
reflects PCAT findings and approve and or endorse the project to continue for funding.
Financial Manager / Asha
Commercial
Manager
Project sponsor
Rod Sheridan
Business owner
Christopher
Panayitou
Project manager
TBC
Benefit owner(s)
Agnes
McCormack
ELT Sponsor
Ian Maxwell
SME endorsement
Name
Signature to endorse Date
Comment
(department)
Change
N/A
Communication and N/A
Engagement
Finance
N/A
Financial
N/A
transactions
Governance
N/A
Health, Safety and
Wellbeing
Information &
N/A
Communications
Technology
Legal and Risk
N/A
People and
N/A
Performance
Procurement
N/A
Appendices
Appendices
PCAT
Financial Analysis
7 | P a g e
Business Case – Low complexity v18
Strategic Portfolio and Programme Office (SPO)
Feedback –
Mail us
Business Case – Low complexity V18
Appendix 1 – PCAT
8 | P a g e
Business Case – Low complexity v18
Strategic Portfolio and Programme Office (SPO)
Feedback –
Mail us
Business Case – Low complexity V18
Appendix 2 – Financial Analysis
Assumptions & Inputs
Input
Source
Electricity variable price
0.091
Average TOU rate plus losses
($/kWh)
and other variable costs
Electricity demand charge
0.32
Vector
($/kVA/day)
Electricity price inflation
2.45%
Energylink
Gas Price ($/kWh)
0.037
Al of government rates
Gas Price Inflation 2021
40%
Genesis
Gas Price inflation 2021
2.9%
Energylink
onwards
Maintenance cost inflation
2%
Review of public inflation
forecasts
Heat pump COP
3.5 - 4
Hot Water heat Pumps
Boiler efficiency
80%
Powell Fenwick Consulting
Cost of new boiler
$150 / kW
Average cost of recent
condensing boiler projects
Westwave
CAPEX Investment (20% Contingency)
$630,750
Cost of replacement boilers
255,000
Net CAPEX
$375,750
Maintenance cost increase (From FY 21-22)
$3,360
Gas savings
$73,629
Electricity cost increase
$30,673
Net OPEX savings per year (FY 20-21)
$42,957
NPV
$112,902
IRR
9.5%
Simple payback
8.2 years
Moana Nui-a-Kiwa
CAPEX Investment (10% Contingency)
$350,700
Cost of replacement boilers
$0 (existing boiler recently replaced)
Net CAPEX
$350,700
Maintenance cost increase (From FY 21-22)
$3,360
Gas savings
$93,192
Electricity cost increase
$43,684
Net OPEX savings per year (FY 20-21)
$49,502
NPV
$216,567
IRR
13.35%
Simple payback
6.8 years
9 | P a g e
Business Case – Low complexity v18
Strategic Portfolio and Programme Office (SPO)
Feedback –
Mail us
Document Outline
