Life Cycle Costing is a method of economic analysis for all costs related to building, operating, and maintaining an energy conservation measure (ECM) project over a defined period of time. Assumed escalation rates are used to account for increases in utility costs over time. Future costs are expressed in present day dollars by applying a discount rate that reflects the value of money invested elsewhere. All costs and savings can then be directly compared and fully-informed decisions can be made.
Were Harvard simply a developer whose interest in the buildings it constructs ended with the ribbon cutting, it might be understandable for the University to ignore ongoing operating costs. However, Harvard owns and occupies a large majority of the buildings it constructs, often for the full life of the building – decades into the future. Decisions made to cut costs in the capital budget up-front can easily lead to greatly increased maintenance and utility costs, burdening the University for years and years to come. This would not be an intelligent way for America’s most-long lived institution of higher education to operate. As a result, Life Cycle Costing is required as part of Harvard’s Green Building Standards.
Green Revolving Fund
The Harvard Life Cycle Costing Calculator is the primary tool used to vet applications for the Harvard Green Revolving Fund, a $12 million revolving loan fund designed to enable investments in sustainable infrastructure on campus without requiring upfront capital from the schools and departments proposing the energy conservation measures.