A Free Lunch from the Economists at ii
Impact Infrastructure is proud to release The Business Case Evaluator (BCE) for stormwater management projects. The BCE has been developed to enhance the Institute for Sustainable Infrastructure‘s EnvisionTM rating system, adding the ability for the EnvisionTM system to provide value-based and risk-adjusted analyses of infrastructure projects. The BCE is free and donated to the industry from your friends at Impact Infrastructure.
The stand-alone Excel workbook, user manual and documentation are available from Impact Infrastructure or ISI.
Peer Reviewed (and Now with Flood Risk)
If you were part of the industry peer review of version 1,thank you. Also please have a look at this release as we have added the benefit of reduced flood risk due to a smaller volume of runoff from the project’s property during storm events. We had some fun doing extreme value modelling of over 6,000 weather station’s rainfall data and this analysis is included in this version.
The BCE does:
- Cost benefit analysis comparisons of green infrastructure or low impact development stormwater management designs compared to no-build or traditional grey infrastructure designs
- Risk analysis to give decision makers confidence intervals for the key financial and sustainability results
- Multi-account cost benefit analysis that shows value by Envision catergory as well as stakeholder account
Cost Benefit Analysis
We have included ten mutually exclusive but comprehensively exhaustive benefits:
Cost or Benefit Type
|1. Increased revenues, change in subsidies, avoided costs (including capital expenditures, operations and maintenance costs, direct employee, energy, waste, water, or materials costs)||City|
|2. Shadow Wage Benefit||City|
|3. Recreational Use Value||City|
|4. Flood Risk||City|
|5. Property Value Benefit||City|
|6. Reduced Heat Stress Mortality Benefit||City (Population rather than local government)|
|7. Water Quality and Habitat Enhancement||River Basin (and Region and City)|
|8. Wetland Enhancement||River Basin (and Region and City)|
|9. CO2 Emissions||All|
|10. Air Quality||City|
Most of the inputs include the capability for users to input a low, expected (or most likely), and high value for each variable.
The user can also indicate the distribution type for inputs. The options in the BCE include a Normal (bell-shaped symmetric) and Beta (non-symmetric and bounded) distributions. In version 2 we’ve added the Triangular distribution too.
The Monte Carlo Analysis is done using Excel macros and without any add-in software. Risk results are presented showing confidence intervals and the probability distributions of the results such as the direct financial returns from a project and the total returns, with the externalities of the project taken into account.
- [img alt=”SNPV” src=”http://impactinfrastructurellc.com/blog/wp-content/uploads/2013/12/SNPV-300×132.jpg” data-mce-src=”http://impactinfrastructurellc.com/blog/wp-content/uploads/2013/12/SNPV-300×132.jpg” height=”132″ width=”300″>
- Sustainable and Direct Net Present Value
he above chart can be interpreted in the following way: there is almost a 100% probability that the project will yield an Sustainable NPV greater than $100 million, with approximately a 50% probability of yielding an S-NPV greater than ~$175 million, and there is almost a 0% probability of producing an Sustainable NPV greater than $300 million.
There are many metrics provided to determine the financial and social viability of proposed stormwater projects. These include the profitability indices, discounted payback period, net present value, return on investment, internal rate of return, modified internal rate of return, and net present values of each individual cost or benefit.
Multiple Account Cost Benefit Analysis
Multiple account cost and benefit analysis provides a breakdown of the costs and benefits to each account type (e.g. financial or direct financial value, government, economic, environment or Envision category such as quality of life, leadership, climate and risk, natural world or resource allocation).
Donated to the industry, gratis, by Impact Infrastructure. (You are welcome).
Next Stop – Transit
Our research is well on the way to our next stop on the journey – BCE for Transit.