Life Cycle Cost Benefit Analysis of an Alternative Fuels Program (Part 1–Vehicle Optimization)

The cost–effectiveness of using alternative fuels (AF) versus a conventional fuel (gasoline) in light duty vehicles is traditionally presented with a simple analysis on what can best be described as “one sheet of paper.” Unfortunately, oversimplification of the cost analysis can lead to extensive errors in the results and misleading cost and/or benefit conclusions.

An extensive model for analyzing the costs and benefits of using alternative fuels has been developed which allows in–depth modeling of major characteristics of a single vehicle (or an entire fleet) which uses alternative fuel. Net present value (NPV) theorem financial modeling has been used to compute a true lifetime cost of ownership. An important output of the model is the required fuel spread needed in order to obtain a NPV of zero dollars, indicating that the savings resulting from using the alternative fuel offset the cost of the additional AF components.

The program design allows optimization for life cycle cost benefit analysis (LCCBA) taking into consideration multiple variables including the time value of money and labor–charges–to–refuel. Results of this model have been correlated with empirical data compiled by TxDOT since 1991. The model was developed in Excel and calculates a minimum fuel spread using recursive macro computations.