Benefit-Cost Analysis - Biomass Boiler
Guernsey provided technical and economic consulting services to Fort Greely, Alaska (FGA) related to its utility systems. The owner of FGA’s privatized utility regularly proposes capital projects to meet the Army’s energy needs. The utility/contractor invests its capital in approved projects and is repaid over the life of the assets constructed.
The contractor proposed to install a biomass boiler at FGA at an estimated cost of about $12.3 million dollars. One of the challenges identified with the project was the lack of
availability of processed biomass fuel in the Fort Greely area. Guernsey evaluated the proposal and recommended clarifications to address proposal deficiencies. Although, there was a savings in fuel cost, when capital cost and O&M were accounted for, the proposal as submitted had a life cycle loss of about $63 million to the Government.
Guernsey’s analysis showed that the third-party contractor had improperly designed its proposed solution by leaving out significant efficiency opportunities. Had the Government approved the third-party project as submitted it would have produced a life-cycle net cost to the Government of about $63 million as opposed to the cost savings alleged by the contractor. Guernsey’s evaluation allowed the Government to prudently decline this project and preserve scarce utility dollars for more worthy projects.