Energy savings and resource efficiency

Business

Case study : Motors

Find out how a textile manuafacturer using an operating lease to finance motors determined that they would be better off by about $663,000 over 15 years if they invested in an energy-efficient system.

Situation

A textile manufacturing company is developing a new production line. It needs to install motors with a combined capacity of 2,750kW. The motors will run approximately 8,000 hrs. p.a. with an average load of 75%.

How does the energy efficient system (EE) compare to the standard system?

Equipment type Standard EE
Cost to install ($) $275,000 $325,000
Operation and maintenance costs ($ p.a.) $0 $0
Electricity use (kWh p.a.) 18,435,754 17,895,879
Equipment life (years) 15 15
Electricity cost reduction in first year from the system ($)   $107,975
Simple payback period for the system (years)   3.0
Simple payback period for the system, with marginal capital1 (years)   0.5

Item  NPV 
Standard system -$24,283,659
EE system -$23,620,871
Difference $662,788

Financial option selected: Operating lease

The company wants a financial option that is off-balance sheet. Based on this preference, the company seeks an operating lease to finance its new efficient motors.

1This is the payback period for the energy-efficient (EE) option using the difference in capital outlay between the standard and EE equipment, rather than the full capital outlay for the EE equipment.

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Page last updated: 10 December 2015