Assessment of the economic efficiency of energy‐saving projects, methodology based on simple and compound methods

Abstract

Abstract Among different engineering projects, there are ones intended to improve the energy‐saving properties of buildings. Both new and much older buildings undergoing refurbishment can be involved. Broadly understood energy‐saving projects increasingly often entail renewable energy installations. Every implementation of such an investment project needs to be preceded by an assessment of its economic efficiency. Although the literature provides examples of methods which can serve this purpose, a coherent methodological approach seems lacking. In this article, the author proposes methodology based on several simple and compound methods combined into a schematic assessment procedure. The methodology is presented as applied in a case of typical photovoltaic roof installation to generate electricity for a single‐family house. The assessment procedure consists of a few steps leading from a preliminary to a more detailed appraisal. The first stage is an analysis of the projected cash flows, which in this case demonstrated that the payback would appear after 9 years. Next, a more precise evaluation showed that the payback period in this investment could be expected after 7.8 years. The following stages of calculations take into account the time value of money, having included a discount rate (discount rate 5%, the planned investment would be profitable). The next step, where the aim was to compute the internal rate of return, showed at what threshold value of the discount rate the investment would continue to yield profit (The IRR = 11.43%). It is extremely valuable information as it reveals the safety margin for the investment. The methodology discussed in this paper, which consists of a complex approach to an assessment of investments, especially in renewable energy sources, can yield much better outcomes than evaluations based on single methods, applied separately.

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