Francis Vanek
First draft April 23, 2002
Revised July 3, 2002
First created for Ecovillage at Ithaca, Second Neighborhood. An accompanying spreadsheet is available, please send email to francisvanek@yahoo.com.
Introduction
This document discusses the financial payback for a number of energy saving options available in Song houses, based on initial costs, typical usage patterns, and costs for conventional energy. The options are as follows:
1. Compact fluorescent lighting
2. Energy efficient refrigerators
3. Photovoltaics
4. Composting toilets
5. Solar water heating
6. Drain heat recovery device
7. Exhaust Heat Recovery ventilation system (brief notes at the end)
For each of these options, it is relatively simple to separate out their contribution to improved energy efficiency. This is different from other alternatives, such as building materials or increased insulation, where energy used in manufacturing or the function of the structure as a whole in terms of energy efficiency are major factors. For these latter technologies, the analysis is too complicated and not possible in the time I had available to allocate to this project.
In the remainder of this document, I will give some summary results, then go over results for individual options 1 through 6, and lastly list possible ways to continue this work.
Summary results
The most important result is that given the relatively high cost of the alternative technologies and low cost of energy in the US (electricity or natural gas), most of these technologies have a relatively long payback period, compact fluorescent lighting being one exception.
Although this might seem to discourage investment in these options, straight payback is not the only reason to invest, and many people in Song have so far been willing and able to spend extra to capture the environmental benefits of these technologies. The payback analysis in part serves to show how, as many of us are probably already aware, the fact that fossil fuel energy costs do not reflect any of their true environmental costs encourages waste and discourages investment in alternative energy and cutting edge technologies. Once a society has discovered that it has vast fossil fuel resources at its disposal, it is dead simple for it to burn some of those resources to pump/mine fossil fuels out of the ground and then consume them wastefully. If, however, we were to incorporate all of the current and anticipated costs of air pollution and global warming into the price of a kilowatt-hour of electricity or a cubic foot of natural gas, I would expect that most or all of the five options not currently competitive would become so.
A related problem is that we as Songs are often penalized for purchasing specialized, energy efficient technology because it is sold in such limited quantities. Take the case of the energy star refrigerators: a comparable non-energy-star refrigerator at Thayer’s costs $90 less simply because the retailer buys 100 units at a time and can pass on the savings. This cost difference takes a long time to overcome from energy savings alone.
Lastly, there is the question of discounting savings several years from now compared to costs incurred today. Effectively, when we do not discount we are saying that financing is available at 0% interest indefinitely. On the other hand, using some positive interest rate for discounting (say 6-7%) makes the calculation complicated. So, is there any reason to use 0% other than to make my job easier? If you look at writing on the subject, some people make the case that 0% (or else a very small interest rate) makes sense for environmental investments like this because it compensates for the fact that direct financial costs of equipment and energy do not take into account all the other environmental costs.
Here is an example of the impact of interest rates on an investment with a long payback period. One of the PV systems has a value of $7,750 with an annual electricity savings of $480, which gives you a payback of 16 years at 0% interest. Using a discounting formula (I won’t present it here but it is in the “Economics of Solar Investments” section of More Other Homes and Garbage, I could explain it later if there is interest), the payback period increases to 22 years at 3%, and at 7% interest the investment never pays for itself – the income stream from saving electric costs never overtakes the initial capital cost.
Results for individual options
All calculations use an average electric cost of 13 cents per kw-h, unless otherwise specified. This is a reasonable number over the long term; perhaps a little high right now, but I would expect them to be higher than this in 5-10 years. These descriptions of results are kept brief; for those who are interested I will circulate the accompanying spreadsheet and you can play with the numbers yourselves.
1. Compact fluorescent lighting: Payback period is rapid. At $0.13/kw-hour,
the payback period for an $8 bulb is 7 to 12 months, depending on whether
it is turned on for an average of 3 to 5 hours per day (the more you use
it, the faster it pays for itself). $8 is also representative of
the cost difference between buying an incandescent fixture with bulb and
a compact fluorescent fixture with the bulb already built in, as are commonly
installed in Frog houses.
2. Energy efficient refrigerators: Here I took the example of a 14.4
cu ft Whirlpool energy start refrigerator at $449 and a 16.8 cu ft Frigidaire
at $359 (it was hard to find two models that were the same size for comparison).
The Whirlpool saves $10.90 a year over the other in electricity, which
gives a payback of approx. 8 years.
3. Photovoltaics: the different systems sizes available and the possibility
of rebates and tax credits complicate this calculation. It is also
necessary to consider the effect of changing electricity prices, since
this is a very long-term investment. Taking the case of a 2500
watt system with rebates and credits, the payback period is 16 to 26 years,
depending on whether the average electric rate is 10 to 16 cents per kilowatt
hour. Since there are so many variables involved, the spreadsheet
includes a separate sheet focused on PV systems, where you can change the
inputs at the top and see the results.
4. Composting toilets: I checked to see whether the electricity saved
by not pumping water for flushing adds up to a payback period, and unfortunately
it is negligible. Connection to the sewer is a large sunk cost for
each house, and the cost of water is flat, except for the electricity costs
of pumping. This amounts to only $1 to $2 per 1000 gallons pumped
(according to Frog records that I got from Maria Gasser), so the savings
per year for a composting toilet system that costs between $1500 and $4000
is probably under $10! As a neighborhood we might someday revisit
the issue of whether we change water charges so that those who have invested
in CTs can save more on their water bills, but for now, the savings are
minimal.
5. Solar water heating: Different units are available on the market,
but I looked into one called a Thermomax since some Songs have expressed
interest. At $3,100 and with natural cost costing an average of $0.02
per cubic foot, it can save an average of $27 per month over the year (considering
better sun in the summer and less in the winter), which gives a payback
of 9-10 years. Here natural gas prices are the key, they are pretty
volatile, on my parents’ last NYSEG bill they were only 1 cent per cubic
foot, but they could also rise above 2 cents.
6. Drain heat recovery device: this device recovers heat from waste
water (esp from baths and showers) and preheats hot water. At the
evening event on energy saving technology I may have given the result of
2-3 years payback period, however on reading more closely I discovered
that this is for electric water heating, with gas the figure is more like
4-5 years. However, one good option may be to combine all waste water
leaving both sides of a duplex into a single DHR device as it drains out
of the house, in which case you could spread the cost out over two households
and the payback would be more like 2-3 years. I mentioned this idea
to Vinnie Giordano the plumber, and though he saw some complications with
it, he did not rule it out so if a duplex group wants to be persistent,
they may be able to arrange this.
To summarize, the technologies can be compared in a table as follows.
Payback period is simply purchase cost divided by annual savings.
I have also included expected life of the technology, and the resulting
lifetime savings. The general rule is that wherever the purchase
cost is a substantially larger than the energy cost, one can expect the
payback period to be long.
Initial cost Energy/year Payback pd Expected life, y Total enrgy
cst
1. Refrigerators $ 450.00 $
48.62
9.26 10 $
486.20
2. Lightbulbs $ 5.00
$ 10.44
0.48 5 $
52.20
3. Composting toilets $ 2,000.00 $
10.00 not appl. 20 $
200.00
4. Solar water heaters $ 3,120.00 $
324.26
9.62 25 $ 8,106.48
5. DHR device $ 300.00 $
60.00
5.00 10 $
600.00
6. PV panels $ 7,750.00 $
480.00 16.15
25 $ 12,000.00
Lastly, I had some communication about ventilation systems from Jon Harrod: the two options are bathroom fans or a whole-house ventilation system with heat exchanger. The latter saves energy by recovering heat from the exhaust air, but uses more energy for fans, so that the net result is probably a wash, according to Jon. The purpose of the heat exchanger is not to save heat and cost, but to improve air quality.
Ways to continue
The intent of this project was to provide some basic payback numbers
in a minimal number of hours of work for me. To save time, I have
not provided a detailed explanation of how the calculations were derived,
and the attached spreadsheet is also in a very basic form – except for
the PV spreadsheet, I have not taken the additional time to annotate it
so that the reader can easily navigate it. These things could be
enhanced in the future. Also, I have not listed the environmental
benefits of the technologies (water quality, air quality, climate change,
etc), but this could be developed in the future.