Calculating the Benefits

Despite the evidence that changing light bulbs can make a real difference in energy consumption, we have all become armored against advertising and the claims on a CFL package are hard to believe. Our hearts are further hardened to the benefits of CFLS because we focus on the cost to buy (CTB) rather than the cost to own (CTO). Thus, in a weird perversion of Benjamin Franklin, we focus on the $0.99 purchase price rather than total savings of much greater magnitude over a lifetime of use. These factors combine to make it difficult for most Americans to pursue energy efficiency choices, such as CFLs.

The nature of  condominium ownership means these challenges are particularly salient there. With shared utility costs (electricity, water, gas), but individual owners controlling purchases within their own units, it is hard to capture savings opportunities. Let us say that a $1 investment in an individual unit would save $2 every year. While the savings would be quite real, the individual home owner making the investment would see very little of the benefits; this savings would be split between hundreds of owners. (With 200 owners, the $1 investment would reap $0.01 in savings for all 200 owners, including the one who put in the investment themselves.)

This is an example of a very common catch-22, where the person “buying” something doesn’t directly pay for the cost of running it. We see this with builders vs the building buyer, the landlord versus the tenant, the employee with a personal lamp vs the employer, etc.  It is time to break through the catch-22 and arrive at sensible solutions, to work for real solutions to real problems.

To get past this barrier, condominiums must consider path to have both the costs and the benefits for energy efficiency choices become common among all owners.

Take the case of Maryland, where electricity prices have soared in recent years. Many condominium buildings are paying 14.5 cents per kilowatt hour (kwh), nearly double the price of a few years ago, and are experiencing electricity bill overruns as they did not fully account for massive electricity price increases. This should foster an aggressive pursuit of energy efficiency, but the barriers remain in place.

In the face of these rising prices, however, condominium boards would be well advised to revisit the issue. While there are many financially beneficial energy efficiency options, the CFL serves well as an example to provide a common description.

Take the simple case of a light bulb’s payback period. Assume that a light is on 40 hours per week. With a 100 watt incandescent light bulb, that would mean 4000 watt hours every week or 4 kwh/week. At a price of 14.5 cents per kWh, that translates into a weekly electrical bill of $0.58 or an annual cost of $30.37 for 208 kwh. For equivalent lighting, a CFL would use 27 watts. 40 hours of use would be 1080 watts or 1.054 kwh with a cost of $0.16 and an annual cost of $8.14 for 56 kwh. The CFL uses 42 cents less of electricity every week. For one year’s use, the CFL would cost $22.23 less than the use of the incandescent while using 152 fewer kilowatt hours.

Okay, for a large building, $22.23 really isn’t that much. But, what if there were 200 units and all of them had just one bulb changed? That would be a $4,446 reduction in an annual electrical bill.

The problem, of course, is that CFLs have a higher cost-to-buy (CTB). A normal price differential could be $2 per bulb, with an incandescent costing 50 cents and a CFL $2.50. In a 40 hour per week scenario for 100 watts of lighting, that $2 difference is repaid in just under five weeks. And then the savings continue for years to come. There is, in addition, another benefit in that CFLs last roughly eight times longer than incandescents. Thus, over five years or so, one would spend more just to buy incandescents in addition to the higher electricity costs.

The problem, again, is that the individual home owner has nearly no incentive to make this switch because CFLs have a higher cost-to-buy (CTB) and the individual owner shares the benefits of the lower cost-to-own (CTO). And, while a condominium has a budget to pay for utilities, it likely has no normal practice of, or budget for, buying appliances or items to go within individual units.

It is time to break the catch-22 of this cycle, to get energy smart.  Imagine a building with 278 total units. (An actual, but unnamed Montgomery County, Maryland, condominium building.) If the overall condominium board would buy two bulbs per unit to give out to owners/tenants, this might cost $1,112 for 556 CFLs at $2 each. Assuming the 100 watt, 40 hours per week scenario, this would reduce the overall building’s electricity cost by $233.42 per week with a repayment period of under five weeks. Annual reduction in an electricity bill for that $1,112 purchase? $12,143.04 in lower electricity bills. Take out the $1,112 purchase cost and the building would save $11,031.04.

By the way, the reduced electricity usage translates quite directly into reduced green-house gas emissions. This scenario reduces emissions by about 85 tons of CO2 per year. This doesn’t solve climate change, by any means, but it is one of the contributing paths to reducing the problem.

But perhaps this whole scenario is far too optimistic. Perhaps some light bulbs aren’t on 40 hours per week. Perhaps not all owners would use the CFLs. If only half the owners used the CFLs, the payback period would be under 10 weeks with a weekly reduced electricity bill of $57.96. If only one-in-four bulbs were used, the weekly savings would be $57.96 and the total payback period would be $19.19 weeks (under five months) with an annual savings of $3,013.92 or nearly three times that $1,112 investment.

There are quite clear reasons why it can be difficult to make energy efficiency investments, even more so in situations with splits between the “cost to buy” and “cost to own” implications. Condominium buildings are a clear case of this. But, the case can be quite compelling as to the benefits. In the face of rising energy prices and the realities of a tightening economy, condominium boards where utilities are a shared expense should examine the situation and seek paths for taking steps that are clearly in the common good of every owner. In the case of compact fluorescent bulbs, that path might best be to simply buy and distribute, every year, some number of CFLs for every unit, recognizing that not every bulb will be used and the full potential savings won’t be realized — even a small proportion of usage will pay off in reduced electricity bills.

Energy efficiency offers real “win-win-win” potential. And if it makes sense for condominiums, where the dichotomy between those who buy lights and those who pay for energy is so stark, every homeowner can also benefit from embracing efficient choices.

Image credit by Paul Keller via Wikimedia Commons.


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