Generator Diesel Polishing: CapEx v. Service Analysis

Life Cycle Cost Analysis of CapEx versus Outsourced Service

CapEx versus Outsource:

Facility Owners with diesel generators are usually aware of the problems of long term storage of diesel in generator tanks. They face the decision of installing capital equipment or outsourcing. Here is how one large data center owner states the issue in its standard performance specifications.

“A life cycle cost analysis (LCCA) shall be performed to determine if a fuel oil polishing system should be installed or if provisions shall be provided for semi-annual or annual polishing to be done by an external service contractor.”

Our LCCA Methodology:

Our reference for LCCA methodology is Stanford University Facilities “Guideline for Life Cycle Cost Analysis”. We did the simplified analysis thinking that the present value of future costs and escalation of the costs would roughly offset. And we used a basis of 10 years.

Tank Size Will Matter:

Capital Costs and Outsourcing costs will vary with the size of the fuel tank. We analyze for 3 common tank sizes for generator fuel: 1000 Gallons, 5000 Gallons, and 10,000 Gallons to cover the range.

What Operating Costs are Included:

Outsourcing costs are comprehensive, as they should be. Operating costs for capital equipment include the following:

· Periodic Inspection. Labor to visually inspect the equipment weekly or monthly.

· Check and Remove Tank Bottom Water. Fixed Polishers usually don’t get the bottom water.

· Fuel Additive Check and Dose. You need to use additives for biocide and ant-gel.

· Change the Filters on the Polishers. Annual change of filters on the unit.

· Troubleshooting Performance Issues. Allow some time for reactive maintenance

What about diesel fuel testing? We left that out of the analysis since it is needed for both cases.

Here is the Calculation for CapEx

Here is the Calculation for Outsource Service

What is the Payback:

Payback calculation also involves a decision about how often the service is needed. It is likely that with experience, and fuel testing, people will find that annual servicing will do. NFPA 110 rules require annual tests and implied servicing.

Diesel suppliers and generator manufacturers may recommend 6-month servicing. Polishing equipment makers may say weekly, but this is usually for the benefit of simple control schedules, and not what is going on with the diesel. So we will stick with the 6-Month and Annual scenarios.

The Payback Timing for CapEx versus Outsource Service

1000 Gallon Tank CapEx Versus Annual and 6-Month Service

Same for 5000 Gallon Tank

And for 10,000 Gallon Tank

Conclusions:

Facilities and Organizations will have different thinking about Capital Investment Payback. And the particular installation characteristics may increase significantly the capital costs of the equipment. However, we will make these conclusions:

· Outsource Service < 5000 Gallon Capacity

· Invest Capital > 10,000 Gallon Capacity

· In Between Think About It