Economics of
Energy Efficiency
ff
vs. Renewable Energy
Tom Marsik
Assistant Professor of Sustainable Energy
University of Alaska Fairbanks Bristol Bay Campus
Bristol Bay Environmental Science Lab
Alaska Rural Energy Conference, Fairbanks, April 2010
Outline
• Current energy problems
• Energy efficiency versus renewable energy
• Conclusions
2
Current energy problems
Heavy use of fossil fuels and thus:
•
•
•
•
Rising energy costs
Unsustainable situation due to limited reserves
Environmental impacts (pollution,
(pollution climate change?
change?, ...))
International conflicts due to US dependence on foreign
sources
Source: http://www.geocities.com
3
Solutions
Reduce consumption of fossil fuels through:
• Energy efficiency
Source: www.withamymac.com
• Renewable Energy
Source: www.chinapage.com
Consider all areas: electricity,
l t i it hheat,t ttransportation
t ti
4
Cost of electricity?
Whi h one to
Which
t use to
t calculate
l l t payback?
b k?
Example – Dillingham costs in April 2010:
Direct fuel cost
$0.18 per kWh
Direct cost to a customer (fuel
cost + distributed fixed costs*)
$0 34 per kWh
$0.34
Total cost to society (direct +
indirect**)
?$1? per kWh
* Maintenance of power lines, etc.
** Clean up of oil spills, etc.
5
Energy Efficiency vs. Renewable Energy
Example
Incandescent bulb powered from a fossil-fuel
fossil fuel power
generation plant
100 W
Daily energy cost @ $0.34 per kWh:
100 W x 0.001 kW/W x 24 h x $0.34/kWh = $0.82
Find the best solution to reduce fossil fuel consumption by 75%.
75%
6
Energy Efficiency vs. Renewable Energy
Approach 1 – Energy efficiency:
Replace the incandescent bulb with a compact
fluorescent lamp (CFL)
A 25 W CFL ≈ 100 W incandescent bulb
 reduction of 75% in fossil fuel energy and electricity cost
Daily savings: 75% of $0.82
$0 82 = $0.62
$0 62
CFL cost: ~$8
$8 / $0.62 = 13  13 day payback
7
Energy Efficiency vs. Renewable Energy
Approach 2 – Renewable Energy:
Produce 75% of needed energy from a wind mill.
Assume class 3 wind (Dillingham).
Average production:
A
d ti 75 W
Wind mill rating needed: ~400 W (wind doesn’t always blow)
Daily savings: $0.62
Cost for 400 W wind mill, inverter, tower, etc.: ~$2,000
$2,000 / $0.62 = 3226  payback: 3226 days = ~9 years
8
Energy Efficiency vs. Renewable Energy
Example results - summary:
Fossil fuels saved
Cost
Payback period
* With 30% tax credit
Energy efficiency
(CFL)
Renewable energy
(wind)
75 W
75 W
~$8
~$2,000
(~$1 400*))
(~$1,400
13 days
9 years
(6 years
years*))
9
Examples of energy efficiency
improvement
p
options
p
Improvement
Payback*
Delamp in overlit areas
0 days
Replace incandescent bulbs w/ CFL
~2 months
Seal building envelope (weather stripping, caulking, etc.)
~6 months
Install occupancy sensors in bathrooms
~1 year
Upgrade T12 fluorescent lamps to T8
~2 years
I
Increase
attic
tti iinsulation
l ti from
f
R-20
R 20 to
t R
R-40
40
~22 years
Replace old refrigerator with Energy Star
~4 years
Increase attic insulation from R-40 to R-60
y
~6 years
Install daylight harvesting controls
~7 years
Increase attic insulation from R-200 to R-220
~100 years
* Without 30% tax credit (can be used for renewable energy and certain energy efficiency
improvements).
10
Cost per unit of fossil
fuelss saved aannually
What is the cheapest way?
Desired state
Renewable energy
Current state
Annual fossil
fuel use
11
Conclusions
• Energy efficiency is currently more economical than
renewable energy at most places
• Research and pilot projects in renewable energy are
i
important
t t for
f the
th ffuture
t
• Ultimate solution includes both energy efficiency
and
d renewable
bl energy
12
Questions???
?
13