Choosing a Treatment Upgrade Under Capacity and Regulatory Risk
A 45,000-person utility has an average demand of 22,000 m3/d and a peak of 32,000 m3/d. Its conventional plant is rated 25,000 m3/d and must reduce TOC by 35% within 3 years to control disinfection by-products. Pilot work shows enhanced coagulation removes 30% TOC, while low-pressure membranes remove 50%; membranes would also expand capacity to 35,000 m3/d. Option A: enhanced coagulation plus GAC, capital $18M, O&M $1.2M/yr, but capacity remains 25,000 m3/d and additional expansion would cost $6M. Option B: membrane plant, capital $32M, O&M $2.4M/yr. Design life is 20 years and discount rate 4%. The utility has limited ratepayer tolerance and wants a defensible recommendation.
1. Compute the present worth of each option, including the capacity expansion for Option A. What does the comparison show?
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P/A for 20 years at 4% = [(1.04)^20-1]/[0.04(1.04)^20]=13.59. Option A includes 7,000 m3/d expansion: capital=18+6=$24M; O&M PW=1.2(13.59)=$16.3M; total PW is about $40.3M. Option B: capital=$32M; O&M PW=2.4(13.59)=$32.6M; total PW is about $64.6M. On present worth alone, A is lower by about $24M. However, A capacity becomes 32,000 m3/d, exactly the peak, with no redundancy, and enhanced coagulation alone removes only 30% TOC, short of the 35% requirement unless GAC adds enough. The cost comparison is conditional on pilot verification and firm capacity.
2. What non-monetary factors and decision path would you recommend to the utility?
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Recommend a staged decision: require a pilot or vendor guarantee that A coagulation plus GAC achieves at least 35% TOC across the raw-water range, and confirm firm capacity with one unit out of service. If A cannot guarantee the TOC limit, B higher present worth may be justified by regulatory certainty, 35,000 m3/d capacity, and smaller footprint. Compare residuals, energy, staffing, membrane replacement, permitting, and rate impacts. A is attractive on cost, but the utility should not select it solely because its present worth is lower; the permit deadline and reliability risk are decision drivers. A hybrid, such as A plus a small additional treatment or storage unit, may be the best risk-adjusted choice.
3. At what annual O&M cost would Option A break even with Option B? Interpret the result for the utility.
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Break-even A O&M: B PW $64.6M minus A capital $24M = $40.6M available for A O&M PW; annual=40.6/13.59=$2.99M/yr. A current O&M is $1.2M/yr, so it could rise to about $3.0M/yr before matching B in present worth. If the capacity expansion were not required, A capital would be $18M and the break-even O&M would be (64.6-18)/13.59=$3.43M/yr. This wide margin shows A is financially robust, but it does not address permit risk. The decision should include a probability-weighted or contingency allowance for the TOC guarantee, not just the deterministic present worth.