Cost of Conserved Energy (CCE)
The CCE is an investment metric that allows the direct comparison of an investment to the cost of energy. This allows for comparison to existing energy prices.
This metric computes an equivalent cost for each unit of energy saved.
You can think of it as an equivalent cost of energy if we were ``buying’’ energy from our lender and energy efficiency equipment manufacturer.
By dividing the investment cost (to save energy) each period by the energy saved each period, we create an effective cost.
CCE = \frac{\textrm{Cost of Efficiency Measure per Year}}{\textrm{Energy Saved by Efficiency Measure per Year}}
To get the energy saved and the cost difference, we need to look at the difference between two scenarios.
The difference between the height of these two columns is the overall cost savings.
The ratio of the cost to the bank divided by the energy consumed is the cost of conserved energy.
Cost of Conserved Carbon (CCC)
This metric is similar to CCE except it computes an equivalent cost for avoided carbon.
This allows for comparison to carbon taxes or other carbon abatement options.
CCC = \frac{\textrm{Cost to Avoid Carbon per Year}}{\textrm{Amount of Carbon Avoided per Year}}
Example
We perform a large energy upgrade that adds insulation to a home and reduces energy use.
The loan is $10,000 USD with a 3% interest rate and is paid back over 5 years. Your energy use is reduced by about 300 therms of natural gas use per year.
What is the conserved cost of energy for this upgrade?
We start with the definition
CCE = \frac{\textrm{Cost of Efficiency Measure per Year}}{\textrm{Energy Saved by Efficiency Measure per Year}}
The cost per year of the efficiency measure is the yearly loan cost. We can calculate this using the capital recovery factor.
\textrm{Loan Payment} = \textrm{Loan Amount} \cdot \textrm{CRF} = 10K \cdot \frac{i(1+i)^n}{(1+i)^n-1} = 10K \cdot \frac{0.03\cdot(1+0.03)^5}{(1+0.03)^5-1} = 2184\; \textrm{USD per year}
Then the CCE is
CCE = \frac{2184\:\textrm{USD per year}}{300\;\textrm{therms per year}} = 7.28\;\textrm{USD per therm}
In this contrived example, this cost is well above the price of natural gas, so we wouldn’t choose the investment.
References
The original description of the CCE is by Alan Meier in the proceedings of the Sixth Annual Industrial Energy Technology Conference Volume II, Houston, TX, April 15-18, 1984
Note that the author uses a different form of the capital recovery factor in the paper.
\textrm{CRF} = \frac{i}{1-(1+i)^{-n}}
If you multiply the top and the bottom by (1+i)^n you get the same formula as in our notes.
\textrm{CRF} = \frac{i}{1-(1+i)^{-n}} \cdot \frac{(1+i)^n}{(1+i)^n}
\textrm{CRF} = \frac {i(1+i)^n}{(1+i)^n-1}