TABLE 6 ENERGY CONSERVATION MEASURES, HEATING AND COOLING LOADS, AND SPACE CONDITIONING AND ENERGY CONSERVATION COSTS-- The method used to calculate the net present cost of the stream of fuel costs over time is as follows. Using the expression PV (x) = x + (1-r)x + (1-r) 2 x + (1-r)3 x + (1-r)n-1x, where x is the annual cost of fuel, PV (x) is the present value of the annual fuel cost, r is the discount rate, and n is the lifetime of the conservation measure (30 years). This series can be summed analytically to yield: PV (x) = x(1 [1-r])/r We substitute r' for r, where r' is the (constant dollar) discount rate minus the (constant dollar) fuel escallation rate. Thus, under our assumption of a 1.4% annual increase in the constant dollar cost of fuel, the application of the above equation to the three different net present fuel cost calculations in columns two through four above yield the following values of (1 [1-r])/r by which the annual fuel cost is multiplied to obtain the present value of the fuel cost: Column Two (r' = 16% 6% inflation 1.4% fuel escallation = 8.6%); x is multiplied by 10.8 to obtain PV(x) Column Three (r' = 3.6%): x is multiplied by 18.5 to obtain PV(x) Column Four (r' = 3.6%):x is multiplied by 18.5 to obtain PV(x) Using the The method used to calculate the net present cost of the stream of fuel costs over time is as follows. expression PV (x) = X + (1-r)x + (1-r) 2 x + (1-r) x + . (1-r)n-1x, where x is the annual cost of fuel, PV (x) is the present value of the annual fuel cost, r is the discount rate, and n is the lifetime of the conservation measure (30 years). This series can be summed analytically to yield: We substitute r' for r, where r' is the (constant dollar) discount rate minus the (constant dollar) fuel escallation rate. Thus, under our assumption of a 1.4% annual increase in the constant dollar cost of fuel, the application of the above equation to the three different net present fuel cost calculations in columns two through four above yield the following values of (1 [1-r])/r by which the annual fuel cost is multiplied to obtain the present value of the fuel cost: Column Two (r' = 16% 6% inflation 1.4% fuel escallation 8.6%); x is multiplied by 10.8 to obtain PV(x) Column Three (r' = 3.6%);x is multiplied by 18.5 to obtain PV(x) Column Four (r' = 3.6%):x is multiplied by 18.5 to obtain PV(x) |