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Article

Profitability Analysis of Selected Low Impact Development Methods for Decentralised Rainwater Management: A Case Study from Lublin Region, Poland

by
Małgorzata Iwanek
* and
Paweł Suchorab
Department of Water Supply and Wastewater Disposal, Faculty of Environmental Engineering, Lublin University of Technology, 20-618 Lublin, Poland
*
Author to whom correspondence should be addressed.
Water 2023, 15(14), 2601; https://doi.org/10.3390/w15142601
Submission received: 20 June 2023 / Revised: 7 July 2023 / Accepted: 15 July 2023 / Published: 18 July 2023
(This article belongs to the Section Urban Water Management)
Browse Figures
Versions Notes

Abstract

:
Water scarcity affects at least 11% of the population and 17% of the territory of the European Union. Simultaneously in cities there is a problem of urban floods caused by violent and intense rainfalls. Decentralized drainage systems are designed to capture rainwater runoff at the place of precipitation and improve the hydrological conditions through the use of surface and subsurface infiltration, retention, and evapotranspiration techniques. The purpose of this paper was to evaluate the financial profitability of selected Low Impact Development (LID) methods for decentralized management of rainwater disposed from the roofs of two different buildings. In the presented conditions, the use of dual installations and infiltration tunnels turned out to be cost-effective solutions, whereas infiltration boxes were unprofitable for both buildings. The most unprofitable solution would become profitable if the investment costs were reduced by as much as 67% or if it was possible to generate 2.28 times more benefits. Although the research was carried out for specific conditions, the obtained results may be helpful in the implementation of similar investments. They are also a kind of contribution to the assessment of the cost-effectiveness of LID on a global scale due to the universality of the proposed research methodology.

1. Introduction

As a result of progressing climate change, both snowless winters and rainless summers interrupted by torrential rains are more often observed. On a global scale, Poland belongs to countries with a medium to high risk of drought [1], while on a national scale, the Lublin region is characterized by a strong and extreme risk of drought [2]. This phenomenon is highly unfavourable from a hydrological point of view; a long period of drought causes a water deficit in the ground, which cannot be supplemented by rapid and intense rainfall [3,4]. More and more countries have problems with access to drinking water. Water scarcity affects at least 11% of the population and 17% of the territory of the European Union [5].
On the other hand, in cities there is a problem of urban floods caused by violent and intense rainfalls [6]. Urban areas, especially city centres, are largely covered with impermeable materials; therefore, during rainfall, a significant part of rainwater is directed to the stormwater drainage system. Despite the fact that no global trend in increasing frequency of extreme precipitation events is observed, the increase can be noticed regionally and can be impacted by local climate conditions [7,8]. During extreme rainfall events a sewage system is not able to convey enough rainwater, which results in urban floods.
Considering both the shortage of drinking water and the problem of urban floods, legal regulations impose the necessity to retain rainwater at the site of the rainfall. The EU Water Framework Directive provides a framework for the protection of inland surface waters, transitional waters, coastal waters, and groundwater [9]. Its goals include promoting sustainable water use and protecting and improving the aquatic environment, as well as mitigating the effects of floods and droughts. The 2030 Agenda for Sustainable Development has been in force since the beginning of 2016. The 6th goal of the Agenda requires the sustainable management of water resources to provide all people with access to water and sanitation [10]. From June 2023, the Regulation on the minimum requirements for the reuse of water applies in the European Union. The Regulation specifies the wastewater quality requirements and rules of risk management for the purpose of producing, supplying, and using reclaimed water, e.g., for irrigation in agriculture [11].
In the context of legal recommendations resulting from real needs, a change in the approach to the problem of rainwater management has been clearly observed in the last two decades. The traditional approach has not taken into account the issue of sustainable development, which should now be considered at all stages of the investment process, starting from the concept stage [12,13,14,15]. Therefore, it is recommended to optimise rainwater management by complementing classic drainage systems based on the pipe networks with so-called Low Impact Development (LID) solutions [16,17].
The term LID is common in the US and Canada, however there are analogous concepts in other countries, e.g., Sustainable Urban Drainage Systems (SuDS) in the UK, Low Impact Urban Design and Development (LIUDD) in New Zealand, and Water Sensitive Urban Design (WSUD) in Australia [18,19]. The LID solutions for rainwater management include systems designed to capture rainwater runoff at the place of precipitation and improve hydrological conditions through the use of surface and subsurface infiltration, retention, and evapotranspiration techniques, analogous to nature. Surface infiltration requires increasing the permeability of paved surfaces by using permeable materials, such as openwork concrete slabs or porous asphalt [20,21,22]. Subsurface infiltration is possible if special devices, such as infiltration boxes or tunnels are used [23,24]. Retention methods include various types of storage reservoirs. The collected rainwater can be used for watering greenery, cleaning around the building, and, after initial treatment, to flush toilets, supply washing machines, or wash cars [25,26,27,28]. Green roofs and rain gardens are examples of methods that use evapotranspiration to improve hydrologic conditions [29,30].
Decentralised management of rainwater as a LID solution is undoubtedly beneficial in terms of hydrology and ecology (e.g., [31,32]), but its financial profitability is a debatable issue [25]. The factors determining the profitability of the rainwater drainage system (investment and operating costs and possible profits) depend on various considerations, e.g., the location of the system, the scope of ecosystem services, the price level, and the type of the system measures [33,34,35,36,37]. According to the results presented in various papers it can be claimed that financial profitability varies in terms of size of the building, its use, and its location. For example, a Discounted Payback Period (DPP) for a commercial building located in Portugal (with roof area equal 160,000 m2) varied between 2 and 6 years depending on the considered scenario [38]. In turn, the DPP for a single family and multi-family building in Barcelona (Spain) varied between 33–43 and 61 years, respectively, according to [39]. Various results can be also found in other papers: DPP equal to 14–27 years for roofs area 78–131 m2 and storage tanks volume 0.2–2.0 m3 in Portugal [40], 9–24 years for residential buildings in Brazil [41], and 17–28 years for a student dormitory in Slovakia [42]. In accordance with [43], rainwater harvesting is going to be financially profitable for future water prices and larger buildings. Investments such as LID are willingly supported by local governments to encourage residents to manage rainfall at the place of its occurrence. Currently, there are two potential programs to support small water retention in Lublin Region: one local government (“Catch rain water”) [44], the other national (“My water”) [45]. In both programs the maximum subsidy is PLN 5000 (approx. EUR 1110) for eligible costs, but the founding sum cannot exceed 70% of total costs in local programme and 80% in national programme. However, these programs are only available to individual residents or communities. There is a lack of investment support programs of a larger scope, including services and trade.
The purpose of this paper is to evaluate the financial profitability of selected sustainable methods for the management of rainwater discharged from the roofs of two types of buildings, differing in size but with similar way of use. The obtained results will make it possible to (1) select the most profitable method for rainwater management among the analysed methods, (2) estimate the amount of possible financial support that would make the sustainable drainage system profitable for an investor, or at least not generate financial losses, and (3) check how the building use affects the financial profitability of the sustainable rainwater management. The above-listed issues are important for potential investors planning to build drainage systems, as well as for local government units supporting sustainable rainwater management.

2. Materials and Methods

The profitability analysis of selected LID methods for decentralised rainwater management was conducted in accordance to the work flow scheme presented in Figure 1. After the selection of buildings with rainwater harvesting potential (step 2.1), the technical analysis of water balance (grey water demand compared to harvested rainwater) based on assumed precipitation was calculated (step 2.2). Different Methods of Rainwater Management (MRM) were taken into account (reuse, infiltration, and disposal) (step 2.3) and cash flows analysis, including investment, exploitation costs, and benefits, of selected methods were calculated (step 2.4). The final step of profitability analysis was the efficiency analysis (step 2.5) which included economic parameters of considered rainwater management methods. Efficiency analysis included following parameters: Net Present Value (NPV), Benefits–Costs Ratio (BCR), and Discounted Payback Period (PDD). Each of the conducted steps of the probability analysis is thoroughly described in Section 2.1, Section 2.2, Section 2.3, Section 2.4 and Section 2.5.

2.1. Buildings Description

The efficiency analysis of methods for rainwater management was performed for two exemplary new-designed buildings located in Lublin Region on the Eastern of Poland: a hotel building and a motel building. The three-storey hotel building has 30 bedrooms, each equipped with sink, shower, and toilet. There are also 3 toilets at the reception and lobby bar. The effective area of the roof from which rainwater is drained equals 893.8 m2. The second building consists of two separate parts: residential and commercial. The sanitary equipment of a motel building is 11 toilets, 8 showers, 14 washbasins, and 2 kitchen sinks. The effective area of the roof equals 370.3 m2. The number of guests was 65 for the hotel and 28 for the motel. Both buildings are on a permeable, well-drained ground (medium grain sand). Groundwater level is at least 5 m below the ground surface [46]. According to Polish standards [47,48], the Lublin Region is located in the 2nd zone of ground frost with a frost depth of 1.0 m and in the 3rd climatic zone with a minimum design air temperature of –20 °C and an average annual temperature of 7.6 °C.

2.2. Technical Analysis

In both cases, the volume of harvested rainwater was calculated in accordance to Formula (1) [49]. The annual precipitation was assumed for both buildings as 600 mm, while the runoff coefficients were assumed as equal to 1.0 (steeply sloping roofs). The assumed precipitation is the national average for Poland, commonly used for design purposes [50]. The daily water demand per single hotel/motel guest was assumed as 0.036 m3/(d∙guest) [51] and calculated in accordance to Formula (2).
Q r h = C · P · A
D g w = n · q f · 365
where Qrh is the volume of collected water (m3/year), C is the runoff coefficient (-), P is the annual precipitation (m), A is the roof effective area (m2), Dgw is the grey water demand (m3/year), n is the number of hotel guests (guest), and qf is the daily water demand for toilet flushing (m3/(d∙guest)).

2.3. Methods for Rainwater Management

For each of the two buildings, 4 methods for rainwater management were proposed and described in detail below:
  • MRM I: a dual installation system with rainwater harvesting;
  • MRM II: local management using infiltration boxes;
  • MRM III: local management using infiltration tunnels;
  • MRM IV: disposal to a stormwater system.
The first three methods are LID methods [52], currently recommended by the EU legislation [9,11], while the last method is the traditional, and so far the most popular, method for draining facilities in cities in Poland. Infiltration methods (MRM II and MRM III) were reasonably considered for rainwater management due to the fact that both buildings were located at permeable soils. Schematic sketches of the analysed MRM variants are presented in Figure 2.
Methods were analysed independently for the hotel and the motel described in Section 2.1, so the analyses were conducted for 8 variants, as given in Table 1.

2.3.1. A Dual Installation System (MRM I)

A dual installation system is a technical solution enabling water recycling and reuse. Dual installations can recycle the grey wastewater from showers, bathtubs, and sinks or the rainwater harvested from roofs, which further can be reused for toilet flushing or irrigation purposes. For both buildings (hotel and motel), the designed dual installation systems are the combination of a classical rainwater harvesting system and supply installation of recycled water. The MRM I system consists of roof drainage, a rainwater storage tank, and a recycled water installation. The underground HDPE (high-density polyethylene) water storage tank has a total volume of 25 m3 for the hotel building and 10 m3 for the motel building. The capacity of storage tanks for both buildings was based on the calculations of the rainwater harvested from roofs.

2.3.2. Local Management Using Infiltration Boxes (MRM II)

Infiltration boxes are measures for retaining and draining rainwater under the ground surface. They are usually in the form of rectangular cuboids with an openwork truss structure in the entire volume, enabling relatively rapid infiltration of rainwater into the soil. The boxes can be joined together horizontally and vertically, creating a spatial structure. Schematic sketches of the analysed MRM II variants are presented in Figure 3.
For the hotel building, a set consisting of 48 boxes (each with a capacity of 0.432 m3) arranged in 2 parallel rows was designed. The set has a volume of 20.736 m3 and dimensions of 28.8 m × 1.2 m × 0.3 m (length × width × height). The set is wrapped in geotextile, placed on a layer of gravel, and sprinkled with gravel so that the gravel layer above and below the boxes has a height of at least 0.40 m. The rainwater from the hotel roof is divided into 2 streams in the separation manhole (diameter of 1.0 m) before it flows into each row of the infiltration boxes set.
For the management of rainwater from the roof of the motel building, 20 boxes, the same as for the hotel, were used, arranged in 2 rows, forming a set with dimensions of 6.0 m × 1.2 m × 0.6 m and total volume of 8.64 m3. The conditions for the assembly of boxes were the same as for the boxes located next to the hotel.

2.3.3. Local Management Using Infiltration Tunnels (MRM III)

Infiltration tunnels, like infiltration boxes, allow for the collection and drainage of rainwater, but they have a simpler structure. They consist of elements with an open bottom and perforated walls, which are empty inside. Elements of the tunnel can be connected in series to create tunnels of any length; it is also possible to create sets of parallel tunnels. Unlike the boxes, tunnel elements cannot be joined vertically. Schematic sketches of the analysed MRM III variants are presented in Figure 4.
For both considered buildings, a set consisting of 2 parallel tunnels was designed. The distance between the tunnels is 1.5 m. The sets consist of 18 elements (9 in a row) and 8 elements (4 in a row) for the hotel and motel, respectively. Each element has a capacity of 0.624 m3 and dimensions of 2.41 m × 0.80 m × 0.55 m (length × width × height). Thus, total capacities of sets equal 11.23 m3 for the hotel and 4.99 m3 for the motel. The rainwater from the roofs is supplied to the tunnels in the same way as to the infiltration boxes—through a separation manhole dividing the stream into two parts. The tunnels are assembled on a gravel layer of 0.10 m in height.

2.3.4. Stormwater System (MRM IV)

The rainwater from the building roof, collected in one manhole, is disposed of through a classic network to a public stormwater drainage system. In the case of the hotel, the network consists of 4 sections of PVC (polyvinyl chloride) pipes DN200 with a total length of 83.7 m, and 3 inspection manholes DN 315. In the case of the motel, one 10.4-m section of PVC pipes DN 200 was enough to connect the collection manhole with the public stormwater system, without additional inspection manholes.

2.4. Cash Flows Analysis

To conduct a cash flows analysis, it was necessary to estimate the investment and exploitation costs, as well as benefits for each of the MRM and for both buildings. The prices applicable in February 2023 were used in the calculations.

2.4.1. Investment Costs

Investment costs have been estimated for all MRM, for the entire investment divided into a part shared for all MRM and a part specific to one MRM. The shared part covered the elements of the investment that are the same for all four methods: the rainwater discharge system on the building (gutters, downpipes) as well as storm drains and manholes next to the building, collecting rainwater from downpipes. The specific part consisted of the rainwater management device (dual installation, infiltration boxes, or infiltration tunnels for MRM I, II, or III, respectively) with the necessary connections or a rainwater drainage system discharging rainwater to the public network (MRM IV).
The investment costs, including direct costs, indirect costs, and the contractor company profit, were calculated in accordance with Polish guidelines and regulations [53,54,55]. The direct costs covered the valuation of labour, materials used for the implementation of the investment, and operation of the used equipment. The labour was expressed in man-hours and included determination of the excavation routes, digging and backfilling the excavations, laying and compacting layers of sand at the bottom of the excavation and directly around the pipe, assembly of all components of the investment, and a leak test. The materials covered both basic materials—components of the investment (pipes, manholes, boxes or tunnels, tank, geotextile, gaskets etc.)—and ancillary materials, which are not components of the system, but are necessary to facilitate the assembly of the base materials or to ensure their proper functioning. The work of equipment was expressed in machine-hours and covered the work of an excavation, a bulldozer, a small plate compactor, and trucks. The labour, the basic materials, and the equipment work were valued on the basis of standard tangible outlays (unit tangible outlay multiplied by its quantity and price), while the cost of auxiliary materials was estimated as a percentage (1–3%) of basic materials cost [56,57,58].
The market offers a wide assortment of different materials for rainwater management, which translates into great price differentiation, e.g., the net prices for the boxes with a capacity of approximately 400 L range from EUR 67.4 to EUR 420.0 in Poland. In this paper, the net prices of basic and usually the most expensive elements of the systems are as follow:
  • MRM I—storage tank: EUR 4725 for the hotel and EUR 2484 for the motel;
  • MRM II—400-L infiltration box (1 pc.): EUR 154;
  • MRM III—620-L infiltration tunnel (1 pc.): EUR 202;
  • MRM IV—inspection manhole DN 315 (1 pc.): EUR 179.
The indirect costs included the costs of the contractor company management and general costs to ensure the execution of construction works; costs for administration, office, security, utilities, insurance, taxes, etc. In accordance with Polish guidelines [53,54], indirect costs were estimated as a percentage of the sum of labour and equipment work. The percentage indicator depends on the type and location of the works, and 65.9% was assumed for the analysed objects. The last component of direct costs, the contractor company profit, was estimated as a percentage (11.6%) of the sum of labour, equipment work, and indirect costs [55].

2.4.2. Exploitation Costs

Similar to the investment costs, exploitation costs have been estimated for the entire investment, divided into a shared part and a part specific to the considered MRM. The exploitation costs of the shared part of the investment included roof drainage control procedure (cleaning and rinsing) and removing the potential obstruction of pipe connections. Operating activities for the specific part of the investment depended on the used MRM. In the case of MRM I, the exploitation costs included: cleaning the suction strainer, ongoing repairs of pumping and water control unit, pumping water, and the operation of the controller. For MRM II, the only operational activity is the periodic inspection and cleaning of the infiltration boxes. According to the producers, the infiltration tunnels are maintenance-free, so MRM III does not generate any exploitation costs. In the case of MRM IV, exploitation costs resulted from the need to pay fees to the stormwater system operator for rainwater discharge [59,60]. The exploitation costs were determined in accordance with the fees for water supply and rainwater disposal, as well as electricity fees obligatory in the analysed building locations (Table 2).

2.4.3. Benefits

In the case of MRM I, the possible benefits resulted from the avoidance of the fees for the disposal of rainwater into the stormwater system and reduction of tap water consumption by using rainwater to flush toilets. In the case of MRM II and MRM III, the only possible benefit is the avoidance of the fees for the rainwater disposal. By contrast, MRM IV is the only method that does not generate any financial benefits for the investor.

2.5. Efficiency Analysis

The efficiency analysis was considered in the economic aspect and was carried out for the sustainable methods for rainwater management (MRM I, MRM II, and MRM III). The stormwater system (MRM IV), which yielded no financial benefits and was therefore unprofitable, constituted only the basis for comparing investment and exploitation costs with sustainable methods.
The efficiency analysis was based on indicators considered to be main investment evaluation criteria [61]: Net Present Value (NPV), Benefits-Costs Ratio (BCR), and Discounted Payback Period (DPP). All the used indicators are classified as discounting methods for assessing the financial profitability of an investment project. The discounting methods take into account changes in the value of money over time, so they are used to assess long-term investments, which include rainwater management systems. The indicators were calculated according to Formulas (3)–(5) below [62,63,64]:
N P V = ∑ t = 0 n C F t ( 1 + r ) t
B C R = ∑ t = 0 t = n B t ( 1 + r ) t ∑ t = 0 t = n C t ( 1 + r ) t
D P P = m i n s ∑ t = 0 s C F t ( 1 + r ) t ≥ 0
where: t is the time period (usually a year) in the investment time duration, n is the total number of time periods during an investment operation, s is the number of time periods during an investment operation for which the investment is profitable, CFt is the net cash flow at time t (EUR/year), r is the discount rate per period (%), Bt is the benefit at time t (EUR), and Ct is the investment and exploitation costs at time t (EUR).
For the purposes of this study, a 30-year operation time of each MRM was assumed (n = 30) and the discount rate r was assumed as equal to 5%. Both values are recommended by European Commission for objects of water and sewage management [65]. According to the common rules (e.g., [61,66,67]), the investment was treated as economically justified if NPV > 0, BCR > 1, or DPP ≤ n. The NPV value indicates an amount of profit generated by the investment after the total time of its operation. BCR is the amount of profit per one spent monetary unit, e.g., EUR 1 spent. The DPP value means the period over which the cumulative discounted net cash flows will offset the initial capital expenditure. In terms of financial benefits, it is more profitable if the NPV and BCR values are higher and the DPP indicator is lower.
The indicators were calculated for the part of the investment, which was specific only for the considered MRM (the entire investment without shared part). Further analysis also concerned only the specific part. The shared part has been omitted because it needs to be built regardless of which MRM would be implemented.
Further analysis focused on checking to what extent changes in investment costs IC and the values of benefits B influence the financial efficiency of the investment. For this purpose, the values of IC were gradually changed using the assumed multiplier PIC and the indicators NPV, BCR, and DPP were calculated for each changed value of IC. Increasingly lower PIC multiplier values below 1 were assumed until the investment became profitable for all considered variants, and increasingly higher PIC above 1 until all variants were unprofitable. Benefits B were similarly changed using the MB multiplier, but the lowest MB value (MB < 1) corresponded to non-profitability, and the highest value (MB > 1) meant investment profitability for all considered variants. This allowed determining the values of IC and B (both parameters independently) for which the investment became profitable or unprofitable, for each considered variant. On the basis of the graphs (presented in Section 3.3) of dependence of individual financial efficiency indicators on the value of PIC or MB, the sensitivity of these indicators to changes in the value of investment costs and benefits was assessed, and the relationship between the values of PIC and MB for which NPV = 0 was determined.

3. Results and Discussion

3.1. Technical Analysis

The calculated volumes of collected rainwater equalled 536.28 m3/year for the hotel and 222.18 m3/year for the motel building, based on a national average precipitation. In both cases (H, M) the grey water demand was higher than the calculated volume of harvested rainwater. In the hotel building, water collected from the roof covered 62.79% of the Dgw, while in the motel building case it was 60.39%. This means that in variants MRM I H and MRM I M, the grey water demand will be met with the water from the distribution network. In contrast, the negative water balance means no prolonged water retention in the storage tank. The details about the water balance calculations for the hotel and motel case study are presented in Table 3.

3.2. Cash Flows Analysis

3.2.1. Investment Costs

The Investment Costs (IC) of MRM realisations for all variants are presented in Table 4 and Table 5. For the hotel, in three out of four variants, the investment costs of the shared part turned out to be significantly higher (1.6–2 times) than the costs of the part specific for a given MRM. Only in the case of the MRM II H variant, the cost of the specific part was 1.7 times higher than the cost of the shared part (Table 4). At the same time, the MRM II H variant turned out to be the most expensive of all variants. For the motel, the division of IC costs between the shared part and the specific part was more differentiated between the variants (Table 5). In the case of the MRM I M variant, the IC costs of both parts were comparable, while in the case of the MRM IV M variant, they were extremely different; the shared part was eight times more expensive than the specific part of the investment. In addition, the MRM IV M variant turned out to be the cheapest of all variants. As in the case of the hotel, the variant with infiltration boxes (MRM II M) was the only variant for which the IC of the specific part was higher than IC of the shared part (1.4 times). For both the hotel and the motel, the solution with infiltration boxes (MRM I) turned out to be the most expensive, and the MRM IV (classic stormwater disposal system) the cheapest. Corresponding solutions (using the same MRM) were 1.7–2.7 times more expensive for the hotel taking into account the entire investment. The investment costs of the shared part for the hotel were twice as high. Taking into account the specific part, the largest difference in IC occurred between the variants MRM IV H and MRM IV M; IC for the hotel were as much as 7.8 times higher than for the motel. Such a large difference resulted from the location of the buildings in relation to the existing stormwater system. The hotel connection was 80 m long and required the construction of three manholes due to changes in direction. The motel connection was eight times shorter and did not require the construction of any additional manholes.
The analysis of the components of investment costs of the specific part showed the greatest importance of the cost of materials in all variants (Figure 5). The share of materials in IC ranged from 50% (MRM IV M) to 89% (MRM I M). The company’s profit had the lowest share in IC: from 1% (MRM I M) to 5% (MRM IV M); it was 3% for half of the analyzed variants. This result suggests the possibility of resigning from estimating the company’s profit in future analyses as the specific component IC does not have significant impact on the final result of the total IC.

3.2.2. Exploitation Costs

The Exploitation Costs (EC) of the proposed rainwater management solutions are incurred during the entire operation period. The summaries of average expenses per 1 year are presented in Table 6 and Table 7. For all variants except MRM III H and MRM III M (variants with infiltration tunnels), the exploitation of the specific part requires clearly higher costs than the exploitation of the shared part, although it should be noted that these costs are not large annual expenses. The MRM IV H and MRM IV M variants (variants with a traditional stormwater system) are characterised by the highest exploitation costs, which results from the necessity of regular fees. The MRM III H and MRM III M variants, as maintenance-free, are distinguished by the lowest EC incurred only by the shared part. The EC percentage split between the shared and the specific part was almost the same for the corresponding variants for the hotel and the motel; a slight difference occurred only for MRM I.

3.2.3. Benefits

Achieving financial benefits (B) was possible after the implementation of MRM I, MRM II, or MRM III. The estimated amounts of the benefits are presented in Table 8. The method that generates the greatest potential for benefits was MRM I, because it allowed not only omission of fees for discharging rainwater to the stormwater system (like MRM II and MRM III), but also a reduction of drinking water consumption, which translates into financial savings. Compared to the annual EC (Table 6 and Table 7), the annual benefits were much higher: more than 30, 25, and 150 times for MRM I, MRM II, and MRM III, respectively. It should be noted that MRM IV H and MRM IV M not only yield no financial benefits (last column of Table 8), but also generate the highest EC (Table 6 and Table 7). However, MRM IV H and MRM IV M are simultaneously the variants with the lowest IC (Table 4 and Table 5).

3.3. Efficiency Analysis

Determining the investment and exploitation costs, as well as the benefits enabled to calculate indicators of the financial efficiency of the investment according to Formulae (3)–(5). In accordance with the methodology, the indicators were calculated for sustainable MRM (MRM I, MRM II, and MRM III), excluding the part of the investment shared by all MRM. The results are presented in Table 9.
The values of all the calculated indicators show that the solution with infiltration boxes was unprofitable for both the hotel and the motel (variants MRM II H and MRM II M). The most unprofitable variant (the solution for the hotel, MRM II H) would result in EUR 12,718.65 loss after 30 years of operation (NPV = EUR − 12,718.65), for every EUR 1 spent only EUR 0.44 would be returned (meaning EUR 0.56 loss per EUR 1 spent) (BCR = 0.44) and the investment would not pay back even if the operation time was extended three times (DPP > 90 years). The most cost-effective variant also turned out to be the variant for the hotel, MRM I H, based on all three indicators. In this case, the NPV value indicates that after 30 years of operation, the investment would generate a net profit of EUR 7209.92 (NPV = EUR 7209.92). The BCR = EUR 1.88 means that for every EUR 1 spent, EUR 0.88 would be received in profit. The period DPP = 11 years means that the investment would pay off within 11 years. The profitability of the second effective variant for the hotel (MRM III H) was much lower. The indicator NPV was almost 4.5 times lower compared to the MRM I H variant, BCR was over 1.5 times lower, and DPP was 2 times higher (Table 9). Over time of investment operation, the advantage of the MRM I H variant over the MRM III H variant in terms of financial profitability clearly increases (Figure 4). At the beginning of the operation period, the cash flows corresponded only to the investment costs and were more favorable to MRM I H by EUR 550 (Y-intercepts in Figure 4). After 30 years of operation, the advantage of MRM I H increased 10 times.
Among the variants for the motel, the most profitable variant turned out to be MRM I M according to the NPV indicator, and MRM III M according to the other two indicators (Table 9). The difference results from the fact that the MRM I M variant with higher investment costs than MRM III M simultaneously generated higher net profits, owing to which it finally achieved a greater benefit after 30 years of operation, despite the fact that the investment paid back 2 years later than MRM III M. This is clearly visible in Figure 6 as the intersection of the line of the sum of cash flows from the beginning of the operation period to any selected year m (m ≤ 30) for variants MRM I M and MRM III M, respectively. Until the 19th year of the duration of the investment operation, the MRM III M variant was more profitable, but from the 20th year, MRM I M variant began to generate higher profits. However, it should be noted that after 30 years of operation, the advantage of the MRM I M variant over MRM III M in terms of financial profitability is not as great as the advantage of MRM I H over MRM III H.
In accordance with the methodology, the next stage of the analysis was to check to what extent changes in investment costs IC and values of benefits B influence the financial efficiency of the investment. As it was mentioned in the Section 3.2.2, the exploitation costs EC for MRM I, MRM II, and MRM III are much lower than B, so their influence on the investment efficiency can be omitted. Figure 7, Figure 8 and Figure 9 show the values of the investment profitability indicators for various values of investment costs; actual IC multiplied by assumed PIC, with unchanged benefit value (MB = 1).
The NPV and DPP indicators turned out to be the most sensitive to IC change for the most unprofitable MRM II H variant (the steepest lines in Figure 7 and Figure 9), while the BCR was most sensitive to IC change for the MRM I H variant (Figure 8), which was the most profitable. However, it should be noted that for all variants, the sensitivity of the BCR to a change in IC is clearly greater when IC is decreased (PIC < 1) than when it is increased (PIC > 1).
To achieve the financial efficiency of the most unprofitable variant MRM II H, investment costs would have to be reduced by 67% (PIC = 0.43) according to all three indicators. On the other hand, the most cost-effective variant MRM I H would cease to be profitable if the IC increased by 93% (PIC = 1.93) (Figure 7, Figure 8 and Figure 9).
The impact of the change in the value of benefits B on the value of the indicators, with unchanged IC values (PIC = 1), is presented in Figure 10, Figure 11 and Figure 12. In the case of the indicator NPV, the sensitivity to changes in the value of benefits is similar for all variants; however, this sensitivity is the highest for the MRM I H variant, and the lowest for two variants: MRM II M and MRM III M (Figure 10). In the case of the BCR, the sensitivity to changes in the B value is clear: the highest for the MRM I H variant, and the lowest for the MRM II H variant (Figure 11). In the case of the indicator DPP, the sensitivity for all variants is clearly lower in the area of investment profitability (below the profitability limit line).
The most unprofitable variant, MRM II H, would achieve financial profitability (according to all three indicators) if the benefits generated by the investment were more than twice higher (MB = 2.28). If the benefits were about 50% lower (MB = 0.53), then the most favourable variant MRM I H would become unprofitable (Figure 10, Figure 11 and Figure 12). The values of PIC and MB independently (i.e., PIC values for MB = 1 and MB values for PIC = 1) corresponding to the break-even points (PIC-limit and MB-limit, respectively) for all variants according to all three indicators are summarised in Table 10.
To achieve profitability for the unprofitable variants, investment costs IC would have to be reduced by 57% (PIC-limit = 0.43 for MRM II H) or 35% (PIC-limit = 0.65 for MRM II M), which translates into financial support of EUR 9616 and EUR 5395, respectively. Because these are relatively large amounts, it could be difficult to obtain government funding or sponsors. Another option is to increase the benefit B by at least 2.28 and 1.53 times for MRM II H and MRM II M, to EUR 1473/year and EUR 636/year, respectively. However, the value of the benefits depends primarily on the amount of fees for discharging rainwater into the stormwater system, so the investor has practically no influence on their value (except for the choice of investment location; different fees are fixed in different locations). An alternative is a combination of both of the above possibilities, i.e., a simultaneous proportional decrease in IC and an increase in B.
The effectiveness of rainwater management methods and their financial profitability strongly depend on the geographical location and climatic conditions, so each investment should be analysed individually. Nevertheless, it is worth comparing the literature results from similar locations to the current case study. Among the case studies from recent years, there are not many studies for collective housing facilities such as hotels and motels located in eastern Poland. Comparable research for a large building (3500 m2) was conducted by Saxon [68] for a facility located in central-eastern Poland, obtaining a payback period at the level of 33 to 40 years. Similar analyses were presented in the works [42] and [69], where for a dormitory located in one of the cities of south-eastern Poland, financial insolvency was shown (negative values of the NPV parameter) with a DPP of more than 30 years. All reference results were conducted for similar annual precipitation conditions (625 mm in [68] and 695.4 mm in [42]) as in the following study for Lublin Region. Between the current results and the results from the literature, there are noticeable similarities for the MRM II solution (infiltration boxes) for both the hotel and the motel. These MRM variants also proved unprofitable, showing negative NPV values and significant DPP. On the other hand, the MRM I (dual installation system) and MRM III (infiltration tunnels) revealed to be financially profitable in the following study, showing positive NPV values and DPP time between 11–22 years. Such positive profitability of analysed MRM variants may be caused by possible savings of tap water (MRM I) and low exploitation costs (MRM III). In the recent papers there is also the analysis performed by Musz-Pomorska et al. [70] for the same exact location as in the following case study (Lublin Region) and identical annual precipitation conditions (600 mm). However, in this study the financial sustainability of selected rain water harvesting designs was analysed for a single-family house. All results obtained by the authors [70] showed financial unprofitability (NPV parameter) in terms of no obligatory stormwater fee. That can confirm rainwater harvesting methods are profitable in accordance with the size of the analysed building.

4. Conclusions

The conducted research allowed for the conclusion that the investment and exploitation costs as well as benefits were lower for the motel than for the hotel, for all analysed MRM. Moreover, the cost of materials was the dominant component in investment costs, while the company’s profit was of the least importance. For all considered variants that used LID methods, exploitation costs were clearly lower than financial benefits.
The dual installation for the hotel (MRM I H) generated the highest financial benefits and was unquestionably the most profitable investment. Although the dual installation for the motel (MRM I M) generated the greatest benefits among the other methods, it was the most cost-effective among the variants for the motel according to one indicator only (NPV). The variants with infiltration boxes (MRM II H and MRM II M) turned out to be the most expensive solutions in terms of investment costs for both the hotel and the motel. At the same time, these variants were the only unprofitable ones among the considered variants that used LID methods.
The cheapest solution in terms of exploitation costs was the use of infiltration tunnels (MRM III H and MRM III M), as they did not require any operational activities that generate costs. It was the second-most cost-effective solution for the hotel according to all calculated indicators and the most cost-effective solution for the motel according to two out of three indicators (BCR and DPP). For both analysed buildings, the discharge of rainwater into the stormwater system (MRM IV H and MRM IV M) was the cheapest solution in terms of investment costs, but it required the highest operating costs and did not generate any financial benefit.
According to all calculated indicators of financial efficiency, the most profitable variant was MRM I H, and the most unprofitable was MRM II H. To achieve the financial efficiency of the most unprofitable variant MRM II H, investment costs would have to be significantly reduced by at least 67%, or the benefits generated by the investment would have to be at least 2.28 times higher. The most cost-effective variant, MRM I H, would not stop being profitable even if the IC increased significantly (by up to 93%), nor if the financial benefits were reduced even by about half.
The results presented in the article refer to specific design solutions for specific buildings; therefore, they are not universal. The presented solution is a case study for two different locations in eastern Poland, which differ in prices (tap water, materials). Therefore, they cannot be directly applicable to the analysis of LID solutions elsewhere. Nevertheless, they can be helpful for making investment decisions for similar buildings, taking into account local conditions, including market prices and rainfall characteristics. The results also contribute to the assessment of the cost-effectiveness of LID on a global scale due to the universality of the proposed research methodology. They can be a valuable guide for developing water saving strategies by investors and designers. In the presented study, the investments for the bigger building (hotel) generally turned out to be more efficient than for the smaller building (motel). Among the analysed solutions, the dual installation proved to be the most profitable. However, it may turn out that a combination of different LID variants could result in higher financial profitability; therefore, this is a suggested future direction of studies on profitability of decentralised rainwater management methods.

Author Contributions

Conceptualization, M.I. and P.S.; methodology, M.I. and P.S.; validation, M.I. and P.S.; formal analysis, M.I. and P.S.; investigation, M.I. and P.S.; writing—original draft preparation, M.I. and P.S.; writing—review and editing, M.I. and P.S.; visualization, M.I. and P.S.; funding acquisition, M.I. and P.S. All authors have read and agreed to the published version of the manuscript.

Funding

This research was funded by internal projects of Lublin University of Technology, Poland, numbers FD-20/IS-6/015 and FD-20/IS-6/034.

Data Availability Statement

The data that support the findings of this study are available from the corresponding author upon reasonable request.

Conflicts of Interest

The authors declare no conflict of interest.

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Figure 1. Work flow scheme of conducted profitability analysis.
Figure 1. Work flow scheme of conducted profitability analysis.
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Figure 2. Schemes of the analysed MRM variants.
Figure 2. Schemes of the analysed MRM variants.
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Figure 3. Schemes of the analysed MRM II variants for hotel and motel buildings.
Figure 3. Schemes of the analysed MRM II variants for hotel and motel buildings.
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Figure 4. Schemes of the analysed MRM III variants for hotel and motel buildings.
Figure 4. Schemes of the analysed MRM III variants for hotel and motel buildings.
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Figure 5. Distribution of components of IC of specific part of investment for individual variants.
Figure 5. Distribution of components of IC of specific part of investment for individual variants.
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Figure 6. Sum of cash flows after m years of investment operation for the effective variants.
Figure 6. Sum of cash flows after m years of investment operation for the effective variants.
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Figure 7. The impact of the change in the value of investment costs IC on the value of the NPV indicator (PIC—investment costs multiplier, MB—financial benefits multiplier).
Figure 7. The impact of the change in the value of investment costs IC on the value of the NPV indicator (PIC—investment costs multiplier, MB—financial benefits multiplier).
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Figure 8. The impact of the change in the value of investment costs IC on the value of the BCR indicator (PIC—investment costs multiplier, MB—financial benefits multiplier).
Figure 8. The impact of the change in the value of investment costs IC on the value of the BCR indicator (PIC—investment costs multiplier, MB—financial benefits multiplier).
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Figure 9. The impact of the change in the value of investment costs IC on the value of the DPP indicator (PIC—investment costs multiplier, MB—financial benefits multiplier).
Figure 9. The impact of the change in the value of investment costs IC on the value of the DPP indicator (PIC—investment costs multiplier, MB—financial benefits multiplier).
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Figure 10. The impact of the change in the value of benefits B on the value of the NPV indicator (PIC—investment costs multiplier, MB—financial benefits multiplier).
Figure 10. The impact of the change in the value of benefits B on the value of the NPV indicator (PIC—investment costs multiplier, MB—financial benefits multiplier).
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Figure 11. The impact of the change in the value of benefits B on the value of the BCR indicator (PIC—investment costs multiplier, MB—financial benefits multiplier).
Figure 11. The impact of the change in the value of benefits B on the value of the BCR indicator (PIC—investment costs multiplier, MB—financial benefits multiplier).
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Water 15 02601 g012 550
Figure 12. The impact of the change in the value of benefits B on the value of the DPP indicator (PIC—investment costs multiplier, MB—financial benefits multiplier).
Figure 12. The impact of the change in the value of benefits B on the value of the DPP indicator (PIC—investment costs multiplier, MB—financial benefits multiplier).
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Table
Table 1. List of the analysed variants.
Table 1. List of the analysed variants.
BuildingSymbol of the Variant for MRM
MRM IMRM IIMRM IIIMRM IV
HotelMRM I HMRM II HMRM III HMRM IV H
MotelMRM I MMRM II MMRM III MMRM IV M
Table
Table 2. Rates for energy and water supply, and rainwater discharge.
Table 2. Rates for energy and water supply, and rainwater discharge.
BuildingService Fee
Electricity SupplyTap Water SupplyRainwater Disposal
HotelEUR 0.15/kWhEUR 0.66/m3EUR 1.20/m3
MotelEUR 0. 15/kWhEUR 0.89/m3EUR 1.87/m3
Table
Table 3. Water balance calculations for the hotel and motel case study.
Table 3. Water balance calculations for the hotel and motel case study.
BuildingC
(-)		P
(m/year)		A
(m2)		Qrh
(m3/year)		n
(guest)		qf
(m3/(d∙guest))		Dgw
(m3/year)
H1.00.6893.8536.28650.036854.10
M1.00.6370.3222.18280.036367.92
Table
Table 4. Investment costs of MRM realisations for the hotel.
Table 4. Investment costs of MRM realisations for the hotel.
Valued ObjectInvestment Costs IC, EUR, for the Variant
MRM I HMRM II HMRM III HMRM IV H
Shared part of the investment13,373.23 (63%)13,373.23 (37%)13,373.23 (62%)13,373.23 (67%)
Specific part of the investment7751.06 (37%)22,362.91 (63%)8300.99 (38%)6652.61 (33%)
Entire investment21,124.29 (100%)35,736.14 (100%)21,674.22 (100%)20,025.84 (100%)
Table
Table 5. Investment costs of MRM realisations for the motel.
Table 5. Investment costs of MRM realisations for the motel.
Valued ObjectInvestment Costs IC, EUR, for the Variant
MRM I MMRM II MMRM III MMRM IV M
Shared part of the investment6569.36
(52%)		6569.36
(41%)		6569.36
(63%)		6569.36
(89%)
Specific part of the investment6088.93
(48%)		9608.57
(59%)		3830.59
(37%)		851.66
(11%)
Entire investment12,658.29
(100%)		16,177.93
(100%)		10,399.95
(100%)		7421.02
(100%)
Table
Table 6. Exploitation costs of MRM for the hotel.
Table 6. Exploitation costs of MRM for the hotel.
Operated ObjectExploitation Costs EC, EUR/year, for the Variant
MRM I HMRM II HMRM III HMRM IV H
Shared part of the investment3.99 (13%)3.99 (18%)3.99 (100%)3.99 (1%)
Specific part of the investment26.77 (87%)18.75 (82%)0.00 (0%)646.12 (99%)
Entire investment30.76 (100%)22.74 (100%)3.99 (100%)650.11 (100%)
Table
Table 7. Exploitation costs of MRM for the motel.
Table 7. Exploitation costs of MRM for the motel.
Operated ObjectExploitation Costs EC, EUR/year, for the Variant
MRM I MMRM II MMRM III MMRM IV M
Shared part of the investment2.67 (16%)2.67 (18%)2.67 (100%)2.67 (1%)
Specific part of the investment14.08 (84%)12.30 (82%)0.00 (0%)415.72 (99%)
Entire investment16.75 (100%)14.97 (100%)2.67 (100%)418.39 (100%)
Table
Table 8. Possible benefits for all variants.
Table 8. Possible benefits for all variants.
BuildingBenefits B, EUR/year, for the Method
MRM IMRM II MRM III MRM IV
Hotel1000.00646.12646.120.00
Motel614.36415.72415.720.00
Table
Table 9. Values of financial efficiency indicators for all variants.
Table 9. Values of financial efficiency indicators for all variants.
VariantValue of Indicator
NPV, EURBCR, -DPP, Years
MRM I H7209.921.8811
MRM II H−12,718.650.44More than 90
MRM III H1631.461.2022
MRM I M3138.771.5015
MRM II M−3407.050.65More than 90
MRM III M2560.021.6713
Table
Table 10. The values of the multipliers PIC or MB corresponding to the break-even point (PIC-limit and MB-limit).
Table 10. The values of the multipliers PIC or MB corresponding to the break-even point (PIC-limit and MB-limit).
MultiplierThe Values of the Multipliers Corresponding to the Break-Even Point
MRM I HMRM II H MRM III H MRM I MMRM II M MRM III M
PIC-limit1.930.431.201.520.651.67
MB-limit0.532.280.840.671.530.60
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Iwanek, M.; Suchorab, P. Profitability Analysis of Selected Low Impact Development Methods for Decentralised Rainwater Management: A Case Study from Lublin Region, Poland. Water 2023, 15, 2601. https://doi.org/10.3390/w15142601

AMA Style

Iwanek M, Suchorab P. Profitability Analysis of Selected Low Impact Development Methods for Decentralised Rainwater Management: A Case Study from Lublin Region, Poland. Water. 2023; 15(14):2601. https://doi.org/10.3390/w15142601

Chicago/Turabian Style

Iwanek, Małgorzata, and Paweł Suchorab. 2023. "Profitability Analysis of Selected Low Impact Development Methods for Decentralised Rainwater Management: A Case Study from Lublin Region, Poland" Water 15, no. 14: 2601. https://doi.org/10.3390/w15142601

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