Energy Efficiency as an Investment: Understanding the Metrics of Energy Measurement
The principal competency of any energy-efficiency implementation is to lower the energy consumption and simultaneously minimize the emission percentages of pollutants and greenhouse gases. In fact, these two competencies are analyzed in quantified/monetary terms by industrial buildings and commercial structures since, in their context, Energy Efficiency is an investment. Typically, an investment of any size is first evaluated for the returns it provides for the risk the investors take and this universal first-step holds tight for energy-efficiency projects as well.
As global consciousness on environmental degradation, green gases, pollutants, carbon-outage and related negatives of industrialization and modernization come to the forefront governments are implementing appropriate environmental laws to lower emissions and energy consumption.
Government incentives
Globally, every government supports energy-efficiency by instituting guidelines and norms that commercial, institutional and residential structures will have to implement and offering incentives and other forms of tax subsidies for citizens subscribing to pro-green laws.
Some countries, like in the US , have voluntary programs, where participating organizations commit to making investments in energy-efficiency where a minimal criterion for investment is twenty percent return on the internal rate of maintaining/improving occupancy standards.
Variables involved in energy-efficiency evaluation
The quantification and analysis are best estimated by adopting advanced mathematical models, of which, there are plenty in the industry. However, the variables that will form the energy consumption and use model for such simulated models will include instability in cash flow factors, the weather or climatic conditions, geo-location of structure or building, operating hours, capacity utilization as well as the fluctuating energy prices.
However, it has to be mentioned that in instances of pre-upgrade evaluation, engineering analysis will be key risk-driver, followed by occupancy behaviour in juxtaposition to building operation. Using historical database of energy-efficiency will ensure defined evaluation of risk-return parameters.
Metrics of energy-efficiency quantification
As with all investments, the return of investment over an extended period of use will determine the efficiency co-efficient of newer energy-saving equipments. In terms of energy, this will be the decrease in operational costs of the facility with improved cash flow. The value of the cash flow incurred over a period will provide the required return on investment. This method of calculating energy-efficiency co-efficient is ideal where projects are being upgraded and newer energy model adoption is being evaluated.
The risk in energy projects is the variation in the expected investment return and is calculated as the mean in the range of values and the variability return is a function of the actual yearly return deviation from the estimated value at a given point of time.
Energy-Efficiency Evaluation Simplified
To organizations, it is critical that energy efficiency quantification follows rigorous industry-specification analysis and application. Most environment related government agencies offer valuable assessment tools applicable to the region and should therefore be the contact-point during project evaluation.
Alternatively, third-party energy-efficiency service providers deliver the required capabilities. They augment evaluation of energy efficiency in terms of financial investment with long-term environment benefits and help your organization shoulder the social responsibility of being a successful commercial organization.