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Publication Title | Doing Well While Doing Good Conservation of Energy as a Rational Financial Investment

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Doing Well

While Doing Good

Conservation of Energy as a Rational Financial Investment

Andy Kerr © 2001 Andy Kerr Warm, inviting, and energy efficient—a bright compact fluorescent (left) and not so bright LED (right) light the porch.

Many years ago, I installed compact fluorescent lightbulbs (CFs) because of “personal

virtue.” They weren’t very good, and they were darn expensive. Now their economics put the recent booming stock market to shame. Measured by either simple payback in years or return on investment, investing in CF lightbulbs is an extremely rational investment for the consumer.

I became interested in financial rates of return, not so much because of the money, but because people often use “payback” as an excuse for not switching to solar energy. While there are compelling environmental arguments to convert to solar energy, environmentalists and solar energy advocates must address the economic issues as well.

Many people I’ve talked to don’t consider the financial costs of operating an electrical device, whether they are buying a lightbulb, a refrigerator, or a furnace. They tend to go for the lowest initial price. Such behavior is not just environmentally insensitive, but also economically irrational.

This malady is not just limited to uninformed consumers, but often to business types, who spend each working minute trying to make money. Energy philosopher Amory Lovins has noted the disconnect in many businesses between capital costs and operating expenses. When a new plant is designed, most often the lowest-cost motors are bought to keep construction costs down. But purchasing more efficient motors, albeit twice as expensive, may have a payback in one or two quarterly reporting periods.

Most people who do consider operating costs will only purchase the more expensive, albeit more efficient, device if it has a payback of no more than three years. They want the additional capital cost to be recouped in energy savings (both measured in dollars, of course) within three years. In other words, roughly a 33 percent return on investment. It doesn’t seem to matter that the

96 Home Power #86 • December 2001 / January 2002

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