The purpose of any energy conservation project is to save money by using less energy or using energy more efficiently. The economic assessment of energy projects can often be complex as it encompasses the engineering techniques required to evaluate the magnitude of energy savings, as well as the economic principles involved in assessing if capital investment in the project is justified. Operating costs can be divided into two categories as Fixed costs (f.c) and Variable costs (v.c) and the total cost (t.c) is the sum of fixed and variable costs.
Fixed costs are those, which do not vary with output even if the output is zero and include interest, depreciation of plant for example, boilers, electrical equipment, recuperators, rates/rent on housing of energy equipment, insurance on plant, wages and certain maintenance costs.
Variable costs are those which do very with output and include fuel, water, certain maintenance and wages.
The break-even point is a good indication of how vulnerable the energy conservation project is to changes in market conditions and have a low break-even point.
In practice the relationships are not strictly linear when the project is analyzed as a maximum-minimum problem. Such an analysis generally involves differential calculus and is called an optimization study.
Fixed costs are those, which do not vary with output even if the output is zero and include interest, depreciation of plant for example, boilers, electrical equipment, recuperators, rates/rent on housing of energy equipment, insurance on plant, wages and certain maintenance costs.
Variable costs are those which do very with output and include fuel, water, certain maintenance and wages.
The break-even point is a good indication of how vulnerable the energy conservation project is to changes in market conditions and have a low break-even point.
In practice the relationships are not strictly linear when the project is analyzed as a maximum-minimum problem. Such an analysis generally involves differential calculus and is called an optimization study.
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