Marginal abatement cost curves
- BREDEM (the Building Research Establishment’s Domestic Energy Model);
- N-DEEM (the Non-Domestic buildings Energy and Emissions Model), which is based on detailed assessments of energy use in around 700 buildings, since they are extremely diverse in nature; and
- ENUSIM (the Industrial Energy End Use Simulation Model), originally designed to model industrial energy use by considering the take up of energy saving technologies in industry.
Source: CCC A marginal abatement cost curve (MACC) illustrating the technical potential for improvements in the non—domestic sector. Each column represents a particular measure. The vertical axis represents the cost per megaton of carbon dioxide saved. The horizontal axis represents megatons of carbon dioxide saved throughout the lifetime of the measure. Measures to be taken on the left of the graph with columns descending beneath the horizontal axis have a negative cost; i.e., they save money. The ones on the right with columns are sending above the horizontal axis have a net cost; i.e., they cost more than they save. The further right that a measure is positioned, the greater its lifetime cost. All energy management measures have a negative cost and save money, as do many efficient heating and cooling methods.
Source: CCC A marginal abatement cost curve (MACC) illustrating the potential for CHP (combined heat and power) in different sectors. It shows that even within a sector, whether is a particular project is cost-effective depends on individual conditions. This is why, for each sector, there are different instances (illustrated by columns of the same colour), some of which are above the line (net cost) and some below the line (net benefit).
Discounted Cash Flow (DCF)
- Estimate the resulting cash flow;
- Apply the discount rate;
- Calculate the end value (net present value).
Net Present Value (NPV)
Internal rate of return (IRR)
- The initial expenditure is typed into a cell on a spreadsheet. This must be a negative number. Using our original example, –60,000 would be typed into the A1 cell;
- The subsequent discounted cash return figures above for each year are entered into the cells directly under the first one. Following the example in Project 1, this would mean typing 30,000 into cell A2, 27,000 into cell A3, etc.;
- The IRR is then revealed by typing into the next cell beneath all the values the function command "=IRR(A1:A4)" and pressing the enter key. In this case, the IRR value, 18%, is then displayed in that cell.
Using Microsoft Excel to calculate the internal rate of return of an investment. The formula in the field at the top is entered into cell A5 and yields the percentage rate based on the figures above.
- conduct an energy audit
- plan a monitoring and verification strategy
- make any energy-saving campaign successful
- evaluate and make the financial case for energy-saving measures
- make use of free energy for lighting and managing heat loss and gain.