Economic feasibility for acquisition of efficient refrigerators in Brazil

Abstract

Since 1993, the Brazilian National Program of Electricity Conservation has been developing the PROCEL Label Program, oriented towards helping consumers to buy more efficient home appliances. In this context, an energy savings of 1379 GWh and a reduction of 197 MW in the Brazilian demand in 2007 are estimated as resulting from efficiency labeling in refrigerators and freezers. This paper aims to evaluate the economic feasibility of purchasing labeled refrigerators instead of inefficient ones, from the consumer’s point of view, considering actual market conditions and buying in cash or financing. The evaluation of energy saving was done for 22 different models of refrigerators and the economy was calculated considering the retail price in the Brazilian market and two actual electricity tariffs, taking into account, respectively, high and low household electricity consumption. The effect of ambient temperature on refrigerator performance was evaluated in two conditions: according to the Brazilian standard for performance tests (32 °C) and using the average temperature of Southern Brazil (18 °C), the mildest region. The benefit in buying labeled refrigerators was evaluated using the Internal Rate of Return and the Payback Time for a cash flow during the appliance life, estimated as 16 years. The results indicate that for cash purchase, for any electricity tariff and for both ambient temperatures studied, the consumers are economically benefited buying labeled refrigerators instead of less efficient models. For credit purchases, in the evaluated conditions, high-tariff consumer typically gains selecting labeled refrigerator, on the other hand, for low-tariff consumer and in colder areas, it is economically advisable to buy less efficient appliances. Sensitivity analysis of energy tariff and financing conditions are presented.

Introduction

After decades of low cost energy, the oil shocks of the seventies raised the price of energy and call the consumers attention to the limits of conventional energy supply, fostering the increase of efficiency in energy systems and stimulating the development of a variety of new and alternative sources of energy. Then, between 1985 and 2002 some years of relief occurred in the energy market. However, in more recent times, the prices of energy have been soaring again and the interest and concerns about energy issues are high. Nevertheless, the rational use of energy and the reduction of energy losses are still low profile. It is important to stress that the energy question is not only a supply problem, but also, a demand hurdle to be overcome.

Currently the global efficiency of conversion of primary energy into useful energy is estimated to be approximately one third. In other words, from the natural resource to the final use, most of primary energy is wasted in the conversion processes, mainly as heat at low temperatures. According to estimates for the next 20 years, due to the implementation of energy saving measures, the demand of primary energy may be reduced by 25–35% in industrialized countries with significant economic gains. Reductions of energy consumption in more than 40% were obtained in the transition of Eastern Europe and the former Soviet Union. In the developing countries that present a high rate of economic growth as well as a large number of obsolete equipment, a potential improvement is even greater, between 30% and 45% [1].

In order to exploit the reduction of avoidable energy losses as a hidden source of energy, the basic routes are to promote changes in customer energy behavior and habits, and introduce more efficient equipment, running the so called “Virtual Power Plants” [2]. Among the actions to put into practice in order to obtain more effectiveness in energy use, such as financing efficient appliances, creating differential tariff, and informing customers, the adoption of performance standards, setting levels of minimum efficiency seems to be one of most effective and it is becoming broadly adopted. The regular use of energy efficiency standards started in Poland in 1962, followed by France, which established patterns for refrigerators and freezers in 1978 [3]. Moreover, other European countries, including Russia, have introduced legislation imposing the use of labels with information about efficiency on appliances in the 1960s and 1970s [4]. The impact of efficiency standards on domestic appliances was evaluated for United States, where refrigerators, which have their efficiency affected by DOE regulation, present the most significant contribution for energy saving in households [5].

In Brazil, it is worth mentioning some initiatives towards implementing energy conservation. Since the mid 1980s the National Program of Electricity Conservation (Programa Nacional de Conservação de Energia Elétrica – PROCEL) and the National Program of Rationalization of the Use of Oil and Natural Gas Derivatives (Programa Nacional de Conservação de Combustíveis e Derivados de Petróleo – CONPET), for electric energy and oil, respectively, have been in operation. In 2001, the Federal Law 10.295/2001 was issued, establishing the Energy Conservation National Policy and the Rational Use of Energy, including some specific guidelines to set minimum levels of performance in energy systems and equipment.

More particularly with regards to energy efficiency labeling, the Brazilian Labeling Program (Programa Brasileiro de Etiquetagem – PBE) managed by the National Institute of Metrology, Normalization and Industrial Quality (Instituto Nacional de Metrologia e Qualidade Industrial – INMETRO), has been orienting consumers at the moment to purchase home appliances and other energy consuming equipment since 1985. In this label, the efficiency is used to classify the equipment in five performance classes (A–E), with the class A corresponding to the most efficient one. In addition to this program, in 1993 the PROCEL created the PROCEL LABEL, which indicates the best performer equipments in each category, as it will be commented further.

The use of these efficiency labels have been done in voluntary basis, but with the introduction of the Federal Law 10.295/2001, the adoption of minimum levels of efficiency has become progressively compulsory [6]. Up to the present, electric motors and the compact fluorescent lamp have minimum levels of performance defined according to this law. Other types of equipment are under consideration of the Ministry of Energy and Mines in order to have also minimum efficiency values.

Concerning economic aspects, in many cases the investment for implementing energy efficiency measures is estimated to be lower than that needed for additional energy supply, since simple measures of awareness of energy use or equipment replacement may lead to substantial savings without affecting the services provided by energy. However, it is important to verify if the expected saving really occurred and, in this direction, one relevant issue to be dealt with is the consistent evaluation of the actual feasibility of these measures.

The purpose of this paper is to analyze the economic feasibility for the consumer to buy one-door refrigerators with the PROCEL Label in his first purchase. Such category of electric home appliances has been chosen because it has a major participation (59%) in the market of freezers and refrigerators in Brazil [7]. In this evaluation the effect of the environment temperature and the age of refrigerator on the energy consumption were taken into account. The temperature influence on refrigerator performance is relevant and an adjustment should be introduced to consider the difference between the actual operating conditions and the adopted in the standardized tests. In fact, small changes in ambient temperature cause up to 20% variation in energy consumption in domestic refrigerators [8]. Regarding to performance degradation, it is estimated that aging effects in refrigerator insulation can reduce in 20% the efficiency of these appliances [9]. Combined with other consequences of using time in refrigerators, such as efficiency decrease of compressors and fittings hardening, is expected an average reduction of 60% of refrigerator performance at the end of typical useful life, evaluated as 16 years, in the Brazilian conditions [10].

In the following topics, a brief review of PROCEL results is presented, followed by an introduction of the methodology adopted, an evaluation of basic data, a presentation and discussion of basic results, as well as their sensitivity analysis to the main economic variables used.