Energy Efficiency Measures and Economic Analysis
Ranking measures
Economic analysis turns audit findings into decisions. Know simple payback (investment / annual savings), life-cycle cost (LCC), net present value (NPV), internal rate of return (IRR), and levelized cost of conserved energy. Use the discount rate to reflect time value; a measure with a long payback can still be NPV-positive if savings persist.
Concepts examiners test
- Baseline and additionality: savings must be attributable to the measure.
- Interaction between measures: envelope upgrades reduce heating load, shrinking the savings from a new boiler - avoid double counting.
- Non-energy benefits: comfort, maintenance, compliance, property value.
- Costs: capital, installation, maintenance, and transaction costs.
- Sensitivity: energy price escalation, discount rate, and occupancy assumptions.
Traps
Mixing nominal and discounted cash flows; using payback alone to reject long-lived measures; ignoring measure interaction; forgetting that savings depend on future energy prices; treating subsidies as free (they change cash flow but not the physical saving).
Worked example
An insulation measure costs €30,000 and saves €6,000/yr in heating. Simple payback = 5 years. Over 20 years at 5% discount, PV of savings ≈ 6,000 × 12.46 ≈ €74,800, NPV ≈ €44,800 - clearly worthwhile despite any single-year view. Rule of thumb: discount factor annuity ≈ (1−(1+r)^−n)/r.
Prioritization
Rank by cost-effectiveness but present bundles; sequence low-cost/no-cost measures first, then capital measures, and state measurement and verification needs.