Question

1. An energy star certified refrigerator uses 650 kWh per year but costs $1000. A similar

   size non-certified refrigerator uses 850 kWh per year but costs only $900. If electricity costs $0.16 per kWh:

   1. Calculate the payback time in years for the upgraded refrigerator.

   2. If you have an old working refrigerator now that uses 1000 kWh per year (at a cost of $0 to buy), what would the payback time be to replace this refrigerator

      with the energy star certified one?

   3. Use the examples from a. and b. to explain how economic incentives can work

      against goals of energy conservation.

Answer 1

Given

1. Energy usage of energy star certified refrigerator = 650 kWh/ year.

2. Cost of energy star certified = $1000.

3. Energy usage of non-certified refrigerator = 850 kWh/ year.

4. Cost of non-certified refrigerator = $900.

5. Electricity cost =  $0.16 per kWh

6. Energy usage of old working refrigerator = 1000 kWh/ year.

7. Cost of old working refrigerator = $0

Soln.

Case 1 (Example a) - Calculate the payback time in years for the upgraded refrigerator.

Payback time can be defined as the time period calculated by dividing the cost of new refrigerator with its yearly energy savings.

Energy bill for the energy star certified refrigerator = 650 x .16 = $ 104 per year.

Energy bill for the non-certified refrigerator = 850 x .16 = $ 136 per year.

Energy saving per year if non-certified refrigerator is replaced by

energy star certified refrigerator = 136-104 = $ 32.

Additional Cost required for the upgraded refrigerator = 1000-900 = $ 100

Payback time =Cost of upgraded refrigerator/ yearly energy saving = 100/32 = 3.125 = 4 years more.

Case 2 (Example b) - Calculate the payback time to replace the old refrigerator with the energy star certified one.

Energy bill for the energy star certified refrigerator = 650 x .16 = $ 104 per year.

Energy bill for the old refrigerator = 1000 x .16 = $ 160 per year.

Energy saving per year if old refrigerator is replaced by

energy star certified refrigerator    = 160-104 = $ 56.

Payback time =Cost of energy star certified refrigerator/ yearly energy saving = 1000/56 = 17.8 = 18 years.

Suppose if there is an incentive of $ 50 for replacing the old refrigerator with new energy star certified refrigerator, then there will reduction in the cost of new refrigerator and the payback time will correspondingly decreases. Then the people will choose for the replacement of their old refrigerator and will buy the new energy star certified ( energy conserved) refrigerators. Thus economic incentives can work against goals of energy conservation.

For Example : Case 1 - Payback time become = 50/32 = 1.5 = 2 years more.

Case 2 - Payback time become = 950/56 = 16.9 = 17 Years.