Case study #7: Energy Efficiency – Building Furnace and Window Replacement

Case Study #7: Energy Efficiency—Building Furnace and Window Replacement

An older house in Richmond is being renovated and two energy efficiency measures are being contemplated: replacing the electric heating with a gas furnace, and using high performance windows. Here we will consider the impact of these on heating expenditures only.

The home is currently heated (to 70 °F) by electric baseboards. Heating is required whenever exterior temperatures drop below 60 °F. The installation of a natural gas furnace and hot air distribution ducts will cost $9000. The electric baseboards require no maintenance, but maintenance costs averaging $100 annually should be budgeted for the natural gas furnace.

The existing windows need to be replaced. One option would be to install low cost double glazing with an R-value of 1.3 ft²·°F/(BTU/hr). For around $5/ft² more, high performance windows with an R-value of 2.9 could be installed. Both types of windows have a solar heat gain coefficient around 0.7.

The building is square in plan, and aligned with geographic north, south, east, and west. In each direction, there is 600 ft² of exterior wall. In each direction, there is 40 ft² of window.  The windows are unshaded, except in summer, when the south-facing windows are shaded 80% of the time. The ceiling and floor are each 2500 ft² in area. The ceiling is insulated to an R-value of 15 ft²·°F/(BTU/hr); the walls and floor to 10 ft²·°F/(BTU/hr).

The estimate rate of infiltration under normal operating conditions is 1.6 air changes per hour. The heated volume of the house is 25,000 ft³.

Electricity costs $0.10/kWh. During the heating season, natural gas costs $1.30 per hundred cubic feet. Inflation is estimated to average 2% for fuel, electricity, parts, and labour. All costs would be paid out of pocket (i.e., no debt financing). The windows and the furnace are expected to last 20 years.

Questions:

1)      What is the simple payback for the combination of natural gas furnace and high performance windows? Would you invest in a project with this simple payback period?

2)      What is the internal rate of return? Would you invest in mutual funds that offered this return?

 

Additional questions if you finish early:

3)      The contractor thinks that natural air infiltration can be reduced by 20% through measures costing $500. Does this have much of an impact on energy consumption compared to the window upgrade itself? Does it make the project more financially attractive?

 

Hints:

• Check all unit switches! Make sure you have used R-values and not U-values.
• The figures on the right hand side of the facility characteristics can be confusing, so it may be easier to look at the “Summary” data. But make use of the check boxes to indicate which measures to include the proposed case (when unchecked, the base case is assumed).