Energy savings and resource efficiency

Business

Case study: Voltage optimisation

Find out how a business using a capital lease to finance voltage optimisation determined that they would be better off by about $331,000 over 50 years if they invested in an energy-efficient system.

Situation

Company XYZ runs a manufacturing facility that uses a wide variety of equipment, including a large amount of electric motors. The company is considering voltage optimisation to generate energy savings at this facility, which involves installing a piece of equipment in the main electrical supply to the site to improve its electrical characteristics.

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

Equipment type Standard EE
Cost to install ($)  $0  $40,000
Operation and maintenance costs ($ p.a.)  $0  $1,000
Electricity use (kWh p.a.)  1,700,000  1,500,000
Equipment life (years)  N/A  50
Electricity cost reduction in first year from the system ($)    $40,000
Simple payback period for the system (years)    1.0
Simple payback period for the system, with marginal capital1 (years)    $40,000

Item  NPV 
Standard system  -$3,197,467
EE system  -$2,866,311
Difference  $331,156

Financial option selected: Capital lease

On-bill financing results in the highest NPV but the company does not purchase energy from Origin Energy and does not wish to change energy retailers, so they will not seek this financial option. The next best options are commercial loans and capital leases. The company would prefer a financial option with fixed finance repayments to provide more certainty when they develop their budgets. They therefore to seek a capital lease to finance their voltage optimisation project..

 

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