Most investments carry the inherent risk of not providing an acceptable return or worse, providing no return at all. An investment in energy efficiency is no exception. Energy efficient products and services are subject to the unscrupulous marketing practice of “green-washing.” This marketing practice involves labeling a product or service as “green” or “sustainable” while you could be investing in equipment or a system that really doesn’t benefit the environment or your bottom line.
An example would be of a standard efficiency furnace with a marketing label of “Eco-Up.” The suggestion of being eco-friendly doesn’t change the fact that you are still getting a standard efficiency furnace. This unfortunate practice has contributed to consumer skepticism in the field of all things green, energy efficiency included.
Consumers may have various reasons for investing in energy efficiency. Some might invest because they feel it will benefit the environment while others may only be looking at it for a return on the investment. With the right evaluation of the product or service, of course both are possible.
Energy efficiency investments are scalable. They can range from the purchase of a single light-emitting diode bulb to a multi-million dollar investment in a mechanical system. When evaluating any energy efficiency project, an apples to apples comparison is an important first step in evaluating the investment. This means, is the energy efficient technology performing the same job as the technology that you are replacing?
Let’s start with that LED light bulb. The job a light bulb is performing can be measured in light output or lumens. The standard incandescent 60 watt light bulb outputs 800 lumens, costs $0.55 and lasts approximately 1,000 hours. An advertised LED equivalent costs 14x the price at about $8, uses 9.5 watts, outputs 800 lumens and lasts 25,000 hours.
At first glance, why would the consumer spend 14x the price to buy that LED version? Aside from the fact that the LED version uses less power, the life of the equipment is 25x longer. This means that over the years, you will buy 25 incandescent light bulbs to equal the life of that LED version. That alone would cost $13.75 assuming the cost of the incandescent light bulb does not change. This means you have already saved $5.75 over the life of the LED bulb.
Now let’s assume you use both light bulbs 8 hours per day, every day. At today’s utility rate power will cost you about $12.25/yr for the incandescent but only about $1.95/yr for the L.E.D. You have now saved $16.07 over the life of the LED bulb. So the up-front cost for the LED light bulb is 14 times what you would pay for the incandescent but when you perform the appropriate analysis the cost of the LED pays back in less than a year and the return continues for the following 8 years.
So how about that multi-million dollar mechanical system? The analysis becomes more complex but the evaluation concept is the same. An economical design we have seen involves the installation of rooftop mounted “packaged units.” These units provide heating, cooling and ventilation all with one piece of equipment. Perhaps your design engineer has identified a more efficient design alternative. Like the LED bulb, it has higher initial costs. Your design engineer was able to provide potential energy savings figures for the alternative design. Those energy use figures should be evaluated over the life of the mechanical system, typically 15-25 years.
Within the financial evaluation of those energy figures, consider utility cost and increases over the life of the equipment, any operation and maintenance cost differences, and any utility incentives or tax credits. Understanding the return on investment and simple payback period helps make for an informed decision. You may find, as with the LED example, that the investment in energy efficiency becomes more attractive after looking at the bigger picture.
Michael S. Jones is a licensed professional engineer in Idaho. He runs SEEDIdaho P.C., a Boise-based mechanical engineering and building commissioning consulting firm dedicated to sustainable design and building operation. A version of this column originally appeared in Idaho Business Review, sister publication to The Daily Record.