The Impact of Water Utility Rates on Chiller Selection


Historically, the operation of a water-cooled chiller plant would deliver lower utility costs than a similar air-cooled chiller plant. A water-cooled chiller’s superior efficiency in kW/ton more than made up for the energy consumed by condenser water pumps and cooling tower fans. However, over the past decade air-cooled and water-cooled chillers have experienced dramatic improvements in energy efficiency. At the same time electricity, water, and wastewater charges have experienced year-over-year increases.

Do water-cooled chiller plants still deliver lower utility bills? Today, many chiller plant energy analyses carefully account for energy costs, and even energy escalation rates – a factor that projects how fuel costs will increase over time, while ignoring water and wastewater costs associated with cooling towers. While highly effective at transferring heat, cooling towers consume millions of gallons of water each year through the process of evaporation, drift, and blowdown. With the rising cost of water and wastewater, this omission can result in an incomplete picture for the building owner. In September 2017, the U.S. Department of Energy’s (DOE’s) Pacific Northwest National Laboratory (PNNL) produced a report on water and wastewater price escalation across the United States. Their findings showed that while energy prices tend to be driven by commodities; water and wastewater are driven by infrastructure projects leading to large variances in prices escalations across various service providers.[1] They found on average annual escalation rates for water range from 0.6% in the West-Mountain region to 8.6% in the Northeast. Average annual wastewater escalation rates range from 1.3 to 5.1 percent. In comparison, the DOE’s Energy Information Administration (EIA) energy escalation calculator[2] predicts average annual escalation rates from 0.35% in the Midwest to 1.78% in Northeast US.

With this degree of variability, a careful analysis of site-specific utility costs coupled with a detailed energy model is invaluable to an owner who is weighing chiller plant options.

Daikin Applied Americas recently conducted a study to compare the utility expense of operating an air-cooled chiller plant versus a water-cooled chiller plant across eight climatic zones as identified in ANSI/ASHRAE/IES Standard 90.1-2016.[3] The study focused on utility costs to the owner and the role of energy modeling in making the best possible selection. It did not address subjects such as total cost of ownership,[4] the water-energy nexus of heat rejection,[5] and associated cooling tower costs including water treatment, testing, Legionella’s inspection, annual cleaning, and winterization.


Study Description and Assumptions

This study is comprised of two sets of comparisons:

  1. The first set compares two ASHRAE 90.1-2016 (Path B) compliant chillers plants: an air-cooled plant versus a water-cooled plant.
  2. The second set makes the same comparison but with higher efficiency chillers.

The DOE’s EnergyPlus whole building energy simulation software (version 8.5) was used to model a mid-size, 200,000-square-foot (18,580 square meters) 10-story office building located in eight climate zones. The building size was selected for three reasons: it typifies numerous buildings across the United States, it is small enough to have fairly simple HVAC operations, yet is large enough to demonstrate a measurable energy cost savings between cooling plant designs. The building envelope, lighting power densities, occupancy, and operating schedules follow ASHRAE standards and methods outlined in ASHRAE 90.1 User Manual.

Each of the modeled locations has two chillers within the 150-300 ton range. Design day calculations were used to determine building load and corresponding chiller capacities, peak power, and flow rates.   

Table 1 outlines the HVAC specifications associated with the model. (See sidebar article for discussion of the cooling tower’s cycles of concentration.)

Table 1: Energy Model Information


Major cities representing 8 ASHRAE Climate Zones

Building Description

Ten story 200,000 Feet2 (18,580 Meters) Office Building

Air-side System

VAV AHU with cooling and heating coils and VAV electric reheat and air-side economizing

Supply Air System Controls

Supply air temp 55 ⁰F (13 ⁰C) with reset to 60 ⁰F (16 ⁰C) when temperatures varies between 80 ⁰F (27 ⁰C) and 60 ⁰F (16 ⁰C)

Building Peak Load

Varied by location:  >300 ton; <600 tons


Chiller Plant Description


Sequence of Operation

Sequential; loading one chiller before bringing on another

Chilled Water Temperatures

44 ⁰F (7 ⁰C) minimum leaving water temperature with a 12 ⁰F (7 ⁰C) loop delta T

Primary Chilled Water Pumps

1 pump per chiller; 9 W/gpm; 2 gpm/ton; 90% motor efficiency; constant speed; 15 feet of head pressure (45 kPa)

Secondary Chilled Water Pumps

1 pump at 13 W/gpm; 2 gpm/ton; 90% motor efficiency; variable speed; 45 feet of head pressure (134 kPa)

Condensing Type



Chiller Type

Two water-cooled centrifugal chillers with VFD ASHRAE 90.1-2016 compliant

Two air-cooled screw with VFD chillers ASHRAE 90.1-2016 compliant

Chiller Efficiency

0.635 kW/ton; 0.40 IPLV

9.7 EER FL; 16.10 IPLV

(1.237 kW/ton; 0.745 IPLV)

Cooling Tower

Two axial-fan cooling towers


Cooling Tower Modeling Strategy

Cross-flow algorithm using 7 ⁰F (4 ⁰C) approach; 10⁰F (6 ⁰C) range; 6 cycles of concentration


Cooling Tower Fan Power and Control

Variable speed fan control with 60 gpm/hp efficiency


Condenser Leaving Water Temperatures

85 ⁰F (29  ⁰C) with 10 ⁰F (6⁰C) Delta T 



Condenser Loop Control

Maintain LWT between 70 and 85


Condenser pumps

Two pumps 19 w/gpm; 3 gpm/ton; 50 feet of head; 90% motor efficiency; constant speed




Study Objectives and Points of Interest

The following objectives were addressed:

  1. How does the energy consumption of an air-cooled chiller compare with that of a water-cooled chiller when taking into account pumping energy (chilled water and condenser) and cooling tower energy?
  2. How does annual utility expense differ between an air-cooled and a water-cooled chiller plant? Is there a turning point where it is actually less expensive to operate an air-cooled chiller versus a water-cooled chiller? Does chiller efficiency affect this turning point?

Eight weather files from ASHRAE climate zones 1A, 2A, 2B, 3A, 3B, 4A, 5A, and 6A were used in the study. Locations were selected to provide a variation in climate as well as utility costs. Published commercial utility rates for each city were used in place of statewide average prices from the DOE‘s Energy Information Administration (EIA) in order to account for demand charges. Air-cooled chillers have higher peak loads and therefore a higher blended rate than their water-cooled counterparts.

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Study Results - Part 1: ASHRAE 90.1 Compliant Chillers Comparison 

Results from this study indicate water-cooled chillers consume 46 to 57 percent less electricity than an air-cooled counterpart. After adding pumping and cooling tower energy, the energy savings is 20 to 37 percent depending upon climate. Figure 1 summarizes this relationship. 

Noteworthy is Phoenix, Arizona, an arid climate with an extensive cooling season, provides the largest overall electric energy consumption savings at 37%.

In this study, the air-cooled chiller plants’ chillers used 93% of total cooling plant energy; primary pumps used 6% and secondary pumps 1%. The water-cooled chiller plants’ chillers used 61% of total cooling plant energy; condenser pumps used 21%; cooling towers used 9%; primary pumps used 8%; and secondary pumps used 1%.

Utility Costs: This study uses electricity rates from DOE’s EIA for commercial building customers (January, 2018)[6]; one of two options allowed by ASHRAE 90.1 2016 Normative Appendix G – Performance Rating Method.[7]  The other option is to use actual electrical rates which have the advantage of including demand charges which are higher for air-cooled chillers. However, with the study based on hypothetical buildings, choosing a rate structure for each city becomes an arbitrary process that is difficult for the reader to reproduce; in contrast to EIA rates which are easily verified by the reader. Water and wastewater rates were taken directly from municipalities’ published information since there is no corresponding centralized data base for water utility rates.

Figure 2 summarizes annual utility operating costs of electricity, water, and wastewater for each location.  

Table 2 provides water consumption and water and wastewater charges associated with operating the cooling tower.

Table 2: Annual Water Consumption and Water and Wastewater Charges


Cooling Tower Water Consumption


Cooling Tower Water and Wastewater Charges

Cooling Tower Charges per kGal


Cooling Tower Water Consumption per Ton (Design)


























Los Angeles





New York















A key question is, how does water and wastewater charges change utility costs?

The water-cooled chiller saved between $4,000 and $26,400 per year in electricity over the air-cooled chiller. However, inclusion of water and wastewater charges resulted in the water-cooled plant having equal or slightly higher utility costs in four cities: Miami, Houston, Los Angeles and New York. Phoenix, Atlanta, Chicago, and Minneapolis maintained savings for the water-cooled chiller ranging from $400 to $12,200.

To save on wastewater expense, facility managers and owners can request credit for evaporative losses by metering the total make-up water quantity and subtracting the metered blowdown. At three cycles of concentration evaporation makes up 67% of make-up water. At six cycles of concentration, evaporation makes up 83% of make-up water consumption resulting in a substantial savings to the owner.


Study Results - Part 2: High Efficiency Water-Cooled Chillers versus High Efficiency Air-Cooled Chillers

If we make the same comparison using high efficiency chillers in place of ASHRAE 90.1 compliant chillers, do the results change? Is the increase in chiller efficiency enough to mitigate the impact of water and wastewater charges?

Part two of this increases each chiller by approximately 20%:

  1. Water-cooled chillers will now have a full load efficiency of 0.53 kW/ton and 0.33 Integrated Part Load Value (IPLV);
  2. Air-cooled chillers will now have a full load efficiency of 11.7 EER and 19.5 IPLV.   

The simulation was re-run with these efficiencies. Figure 3 summarizes the energy consumption and Figure 4 summarizes the utility charges.

Electric energy savings from water-cooled chiller plants ranged from 16 to 35 percent and saved between $2,900 and $21,000 per year in electricity.  After adding water and wastewater charges, all water-cooled plants showed an increase in utility charges over their air-cooled counterparts ranging from $1,000 to $8,200 with the exception of Phoenix and Minneapolis, which showed annual utility cost savings of $6,700 and $200, respectively.

Upgrading from ASHRAE 90.1 base chillers to higher efficiency chillers resulted in lower comparative utility costs for air-cooled chillers versus water-cooled chillers over a range of climates and utility rate structure.

​Cooling towers consume large quantities of water (makeup water) to replace losses due to evaporation and blowdown. Blowdown is water bled from the system in order to remove high levels of soluble and semi-soluble solids which can lead to corrosion and scaling. Cycles of concentration (COCs) are defined as the ratio of blowdown conductivity divided by makeup water conductivity. Increasing COCs means water is recirculated longer before being blown down, reducing the amount of required makeup water.

ASHRAE GreenGuide[8]  notes that while many systems today operate at two to four cycles of concentration, it is possible to increase to six or even eight COCs for locations with high quality make-up water (low levels of minerals) or through chemical-free technology. Increasing COCs from three to six reduces cooling tower make-up water by 20% and cooling tower blowdown by 50%.[9] Figure 5 shows the relationship between COCs and percent reduction in make-up water as calculated for this study using the EnergyPlus software. 


The improved efficiency of chillers, coupled with rising electricity, water, and wastewater rates, is changing the landscape of chiller plant utility costs. While it’s important to include accurate electricity costs and escalation rates, it’s equally important to include water and wastewater charges and their corresponding escalation rates. In addition, climate and equipment selection play a critical role in arriving at the best equipment. Undoubtedly, energy modeling will play an increasingly important role in future analyses.

Going forward: A subsequent phase of this study would include different building types particularly those with extended hours and higher loads such as hospital and retail settings. Moreover, the study could expand to include a lifecycle costs analysis with updated energy and water and wastewater escalation rates.


About the Author

Judith M Peters, PE, is an energy modeling engineer at Daikin Applied Americas.

About Daikin Applied Americas

Daikin Applied Americas, a member of Daikin Industries, Ltd., designs and manufactures technologically advanced commercial HVAC systems for customers around the world. Customers turn to Daikin with confidence that they will experience outstanding performance, reliability and energy efficiency. Daikin Applied equipment, solutions and services are sold through a global network of dedicated sales, service, and parts offices. For more information or the name of your local Daikin Applied representative, call 800-432-1342 or visit

All images courtesy of Daikin Applied Americas.

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Editor’s note: This is an edited version of an article previously published by the same author in the June 2018 issue of ASHRAE Journal.


[1] U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy. 2017. “Water and Wastewater annual Price Escalation Rates for Selected Cities across the United States.” 

[2] U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy. 2017. “Energy Escalator Rate Calculator.”

[3] ANSI/ASHRAE/IES Standard 90.1-2016, Energy Standard for Buildings Except Low-Rise Residential Buildings, Table 6.8.1-3

[4] Naguib, R. 2009. “Total Cost of Ownership for Air-Cooled and Water-Cooled Chiller Systems.” ASHRAE Journal 51(4): 42-48

[5] Hawit, O. 2017, “Water-energy nexus: heat rejection systems,” ASHRAE Journal 59(9).

[6] U.S. Energy Information Administration. 2018. “Average Price of Electricity to Ultimate Customers by End-Use Sector.”

[7] ANSI/ASHRAE/IES Standard 90.1-2016, Energy Standard for Buildings Except Low-Rise Residential Buildings, Normative Appendix G; paragraph G2.4.2

[8] ASHRAE GreenGuide - Design, Construction, and Operation of Sustainable Buildings, Fourth Edition. 291-293.

[9] U.S. Department of Energy Efficiency and Renewable Energy. 2017. “Best Management Practice #10: Cooling Tower Management.”