Saving Energy Dollars In Your Condominium Through Cost Avoidance

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Title:
Saving Energy Dollars In Your Condominium Through Cost Avoidance
Physical Description:
Fact sheet
Creator:
Jar
Publisher:
University of Florida Cooperative Extension Service, Institute of Food and Agriculture Sciences, EDIS
Place of Publication:
Gainesville, Fla.

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Collected for University of Florida's Institutional Repository by the UFIR Self-Submittal tool. Submitted by Melanie Mercer.
Publication Status:
Published
General Note:
"EES-27"

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University of Florida Institutional Repository
Holding Location:
University of Florida
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All rights reserved by the submitter.
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IR00004794:00001


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FactSheetEES-27 SavingEnergyDollarsinYourCondominiumThroughCost Avoidance1 RonaldE.Jarnigan2Oneoftheunfortunateconsequencesofrapidly risingenergypricesisthateventhoughenergy efficiencyeffortsmayreduceoverallenergyusage,the totalenergybillmaycontinuetoincrease.Frequent rateincreases,coupledwithhigherfueladjustment costs,haveresultedinmanycondominiummanagers asking,"WhyshouldImaketheefforttoconserve energywhenmybillisgoingtogoupanyway?"The answertothisquestionliesinlookingatenergy efficiencyasamethodofcostavoidance.Anysteps takennowtoavoidpayingadditionalcostsforenergy willresultinmoneysavingsinthefuture. Toillustratethispoint,assumethata condominiumisconsideringanenergyconservation measure(ECM)thatwillyieldamodest5%average annualreductioninelectricalenergyusageforthe property.UsingdataobtainedfromaSouthFlorida high-risecondominiumwithcentralheatandair,itis foundthattheenergyusagebeforethe implementationoftheenergyconservationmeasure wasapproximately3,800,000kilowatthours(kwh)per year.Withtheexpected5%energyreduction,the averageenergyusagewouldbe3,610,000kwhper year.Theamountsofyearlydollarsavingsforvarious existingelectricutilityratesareshowninTable1. Table1illustratesanimportantpointabout Table1. YearlyDollarSavingsforVariousElectric UtilityRates. Electric UtilityRate (/kwh) Yearly Electrical Cost Before ECM($) Yearly Electrical CostAfter ECM($) Yearly Savings ($) 5 190,000 180,500 9,500 51/2209,000198,550 10,450 6 228,000 216,600 11,400 61/2247,000234,650 12,350 7 266,000 252,700 13,300 71/2285,000270,750 14,250 8 304,000 288,800 15,200 81/2323,000306,850 16,150 9 342,000 324,900 17,100energyconservationinvestments:thehigherthe 1.ThisdocumentisFactSheetEES-27,aseriesoftheFloridaEnergyExtensionService,FloridaCooperativeExtensionService,InstituteofFood andAgriculturalSciences,UniversityofFlorida. 2.RonaldE.Jarnigan,MechanicalEngineeringSpecialist,FloridaEnergyExtensionService,CooperativeExtensionService,InstituteofFood andAgriculturalSciences,UniversityofFlorida,GainesvilleFL32611. TheFloridaEnergyExtensionServicereceivesfundingfromtheFloridaEnergyOffice,DepartmentofCommunityAffairsandisoperatedbythe UniversityofFlorida'sInstituteofFoodandAgriculturalSciencesthroughtheCooperativeExtensionService.Theinformationcontainedherein istheproductoftheFloridaEnergyExtensionServiceanddoesnotnecessarilyreflecttheviewsoftheFloridaEnergyOffice. TheInstituteofFoodandAgriculturalSciencesisanequalopportunity/affirmativeactionemployerauthorizedtoprovideresearch,educational informationandotherservicesonlytoindividualsandinstitutionsthatfunctionwithoutregardtorace,color,sex,age,handicap,ornational origin.Forinformationonobtainingotherextensionpublications,contactyourcountyCooperativeExtensionServiceoffice. FloridaCooperativeExtensionService/InstituteofFoodandAgriculturalSciences/UniversityofFlorida/ChristineTaylorStephens,Dean

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SavingEnergyDollarsinYourCondominiumThroughCostAvoidance Page2utilityrate,themorecost-effectiveagiven expenditurebecomes.If,intheexample,thecostof theECMwas$20,000,thentheyearlyreturnon investmentat6cts/kwhwouldbe57%whilethe assumedfigures,thecondominiumwouldachievea returnat8cts/kwhwouldbe76%.Usingthese simplepaybackof1.8yearsat6cts/kwhand1.3years at8cts/kwh.Eveniftheenergyconservation measurehadcost$100,000,thereturnoninvestment wouldstillrangefromyearlyfiguresof11%to15%. Whilethissimpleanalysisdoesnotconsiderthetime valueofmoney,itdoespointouttheattractiverates ofreturnofferedbyenergyconservationinvestments.EFFECTSWITHANNUALRATEINCREASESThissameenergyconservationmeasureshouldbe consideredinlightofannuallyescalatingutilityrates. Itisagainassumedthatthesameannualenergyusage rateswillapply,andtheexpectedenergysavingswill be5%.Next,therateofenergycostincreasemustbe projected.Forcomparisonpurposes,theexample considersthreeratesofincrease:low,6%/year; moderate,8%/year;andhigh10%/year.Tosimplify mattersfurther,anexistingutilityrateof6cts/kwh(as atypicalvalue)isassumed.Usingtheseassumptions, Table2comparestheyearlyenergycostsbeforeand afterimplementationoftheECM. Table2. EffectofInflationonYearlyEnergyCosts. AnnualEnergy InflationRate (%) YearlyEnergyCostat 6cts/kwh($) (inthousands) 1 2 3 4 5 0 BeforeECM 228 228 228 228 228 AfterECM217217217217 217 6 BeforeECM 228 242 256 272 288 AfterECM217230243258 273 8 BeforeECM 228 246 266 287 310 AfterECM217234253273 295 10 BeforeECM 228 251 276 303 334 AfterECM 217 238 262 288 317Table2clearlyillustratestheproblemunder discussion.Wheninflationoccurs,andyearlyenergy costsarecomparedbeforeandafterimplementation oftheECM,itisfoundthatthetotalenergybillhas risen.Forexample,atanassumedenergyinflation rateof8%peryear,thesecondyearenergycostsare $233,928afterimplementationoftheECM.Alltoo frequentlytheconclusionisdrawnthatthe expenditurefortheECMwasworthless,sinceenergy billsincreasedby$5928(i.e.,$233,928minus $228,000)afterimplementingtheECM. Theerrorinthelogicshouldbeapparent, however,bylookingmorecloselyatthetable.Had theECMnotbeeninstituted,energybillswouldhave risenby$18,240--fromayearlyfigureof$2228,000 toayearlyfigureof$246,240.Thisrisewouldhave occurredfromthenormalinflationofenergyprices. However,byinstitutingthesuggestedECM,the condominiumsaved$4400inthefirstyear--the differencebetween$228,000and$216,000. Forthefive-yearperiodshown,thetotalsavings achievedbytheECMattheassumed8%inflation ratewouldbethedifferencebetween$1,337,584and $1,270,704,or$66,880.Again,thesesavingsdonot takeintoaccountthetimevalueofmoney,butare substantialnonetheless.Thesavingsachievedbycost avoidancecouldbeusedbythecondominium managertoholethelineonmonthlymaintenancefee increases,ortoprovideadditionalservicestothe residents.Ineithercase,theresidentsofthe associationwouldderivethebenefits. Insummary,energycostswillcontinuetorise overtime.Investmentsinenergyconservation measureswillsavemoneyontheenergybill.The prudentcondominiummanagerwillrealizethat despiteincreasesintotalbillsrealsavingscanbe achievedthroughcostavoidance.Armedwiththe facts,managerswillbeabletomakethesmart financialdecisionsthataffectthefutureoftheir condominiumbuildings.