In accounting for the lifetime of energy efficiency improvements, MS are able to attribute the real saving that each action will achieve between the year of its implementation and 2020. This ‘straightforward’ method calculates the savings for each year the action is carried out, until 2020. If the action is only carried out for one year then the saving calculation is only of that one year.
There are some disadvantages to this method:
- It can give different values to the same action, depending on the year it is implemented.
- Because it aims to calculate savings up to 2020, it allows a maximum of 7 years' worth of savings to be taken into account – yet some actions deliver savings over a much longer period. The straightforward method may not give enough incentive for these long-lived actions.
There are 3 alternatives to the ‘straightforward’ method, they are:
- To give each action an 'index value' that reflects its expected lifetime. Under this method, an action that only runs for one year could be given an 'index value' of 0.25, while an action that lasts up until 2020 could be given an 'index value' of 6. If each of these actions saves 1 toe per year, then the saving attributed to the action that last a year would be (1 x 0.25) = 0.25 toe. The saving attributed the action that lasts till 2020, would be (1 x 6) = 6 toe.
- To 'cap' the lifetimes attributed to individual actions. For example, a 'cap' of 5 years could be chosen. Under this method, the saving attributed to an action that lasts one year would be 1 toe. The saving attributed to an action that runs till 2020, would be (1 x 5) = 5 toe.
- To use full lifetimes, but to 'discount' future-year savings. For example, a discount rate of 10% per year could be chosen. Under this method, the saving attributed to an action that runs for one year would be 1 toe. The saving attributed to an individual action with a lifetime of 4 years, saving 1 toe each year, would be 10% less each year it is implemented. The saving attributed to an action with a lifetime of 25 years, whatever the year of implementation, would be 9.28 toe.
With all of these alternatives the MS must ensure that the result is not higher than the one given by the 'straightforward' approach.
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