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Calculating the Financial Benefits of Compact Fluorescent Light bulbs (CFLs): the case of a condo building

September 30th, 2008 · 12 Comments

We have all become armored against advertising and the claims of “save $26” (or more) on a CFL package are hard to believe. In addition, in our culture, we focus on the cost to buy (CTB) rather than the cost to own (CTO). Thus, in a weird perversion of Benjamin Franklin, we focus on the $0.99 purchase price rather than the cost through the years that we might use something. These factors combine to make it difficult for most Americans to pursue energy efficiency choices, such as CFLs.

This reality of condominium structures worsens this situation. With shared utility costs (electricity, water, gas), but individual owners controlling purchases within their own units, it is hard to capture savings opportunities. Let us say that a $1 investment in an individual unit would save $2 every year. While the “savings” would be quite real, the individual home owner making the investment would see very little of the benefits ss this savings would be split between hundreds of owners. (With 200 owners, the $1 investment would reap $0.01 in savings for all 200 owners, including the one who put in the investment themselves.)

This is an example of a very common Catch-22, where the person “buying” something doesn’t directly pay for the “cost” of running it. We see this with builders vs the building buyer, the landlord versus the tenant, the employee with a personal lamp vs the employer, etc … It is time to break through the Catch-22 and arrive at sensible solutions, to work for real solutions to real problems.

To get past this barrier, condominiums must consider path to have both the costs and the benefits for energy efficiency choices become common among all owners.
Let us take the case of Maryland, where electricity prices have soared in recent years. Many condominium buildings are paying 14.5 cents per kilowatt hour (kwh), nearly double the price of a few years ago, and are experiencing electricity bill overruns as they did not fully account for massive electricity price increases. This should foster an environment with aggressive pursuit of energy efficiency, but the barriers remain in place.

In the face of these rising prices, however, condominium boards would be well advised to revisit the issue. While there are many financially beneficial energy efficiency options, the CFL can stand in very well for them in providing a common description.

Let us take a very simple case for a light bulb pay back period. Assume that a light is on 40 hours per week. With a 100 watt incandescent light bulb, that would mean 4000 watt hours every week or 4 kwh/week. At a price of 14.5 cents per kWh, that translates into a weekly electrical bill of $0.58 or an annual cost of $30.37 for 208 kwh. For equivalent lighting, a CFL would use 27 watts. 40 hours of use would be 1080 watts or 1.054 kwh with a cost of $0.16 and an annual cost of $8.14 for 56 kwh. The CFL uses 42 cents less of electricity every week. For one year’s use, the CFL would cost $22.23 LESS than the use of the incandescent while using 152 fewer kilowatt hours.

Okay, for a large building, $22.23 really isn’t that much. But, what if there were 200 units and all of them had just one bulb changed? That would be a $4446 reduction in an annual electrical bill.

The problem, of course, is that CFLs have a higher cost-to-buy (CTB). A normal price differential could be $2 per bulb, with an incandescent costing 50 cents and a CFL $2.50. (But, as per the photo of a $2.98 for a package of four 60 watt equivalent CFLs, it is not hard to find them at lower cost.) In a 40 hour per week scenario for 100 watts of lighting, that $2 difference is repaid in just under five weeks. And, then the savings continue for years to come. There is, in addition, another benefit in that CFLs last roughly eight times longer than incandescents. Thus, over five years or so, one would spend more just to buy incandescents in addition to the higher electricity costs.

Shucks, listen to Nike and “just do it”, no? The problem, again, is that the individual home owner has nearly no incentive to do this because CFLs have a higher cost-to-buy (CTB) and the individual owner shares the benefits of the lower cost-to-own (CTO). And, while a condominium has a budget to pay for utilities, it likely has no normal practice of or budget for buying appliances or items to go within individual units.

It is time to break the Catch 22 of this cycle, to Get Energy Smart! NOW!!!

Imagine a building with, let us say, 278 total units. (An actual, but unnamed Montgomery County, Maryland, condominium building.) If the overall Condominium board would buy two bulbs per unit to give out to owners/tenants, this might cost in the range of $1112 for 556 CFLs at $2 each. Assuming the 100 watt, 40 hours per week scenario, this would reduce the overall building’s electricity cost by $233.42 per week with, again, a repayment period of under five weeks. Annual reduction in an electricity bill for that $1112 purchase? $12,143.04 in lower electricity bills. Take out the $1112 purchase cost and the building would save only $11,031.04.

By the way, the reduced electricity usage translates quite directly into reduced green-house gas emissions. This scenario reduces emissions by about 85 tons of CO2 per year. This doesn’t ‘solve’ Global Warming, by any means, but it is one of the contributing paths to reducing the problem.

Okay, perhaps this whole scenario is far too optimistic. Perhaps some light bulbs aren’t on 40 hours per week. Perhaps not all owners would use the CFLs. If only half the owners used the CFLs, the payback period would be under 10 weeks with a weekly reduced electricity bill of $57.96. If only one-in-four bulbs were used, the weekly savings would be $57.96 and the total payback period would be 19.19 weeks (under five months) with an annual savings of $3013.92 or nearly three times that $1112 investment.

There are quite clear reasons why it can be difficult to make energy efficiency investments, even more so in situations with splits between the “cost to buy” and “cost to own” implications. Condominium buildings are a clear case of this. But, the case can be quite compelling as to the benefits. In the face of rising energy prices and the realities of a tightening economy, condominium boards where utilities are a shared expense should examine the situation and seek paths for taking steps that are clearly in the common good of every owner. In the case of compact fluorescent bulbs, that path might best be to simply buy and distribute, every year, some number of CFLs for every unit, recognizing that not every bulb will be used and the full potential savings won’t be realized — even a small proportion of usage will pay off in reduced electricity bills.

Energy efficiency offers real “win-win-win” potential. In this case,

  • The condo as a whole and individual owners will save money through reduced electricity use.
  • This will contribute to lowering pressure on the Maryland electrical grid and, potentially, contributing to lower prices per kilowatt hour.
  • And, this reduces greenhouse gas emissions.
  • Now this is a real solution to a real problem.

    Sources to review / Useful sites:

  • Energy Cost Calculator for CFLs (Department of Energy)
  • Find an Energy-Saving Light Bulb, Environmental Defense Fund
  • Best Compact Fluorescent Light Bulbs,” Popular Mechanics
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    Tags: analysis · CFL · electricity · Energy · energy efficiency · financial policy · incandescent lighting · lighting

    12 responses so far ↓

    • 1 Jeff K // Oct 1, 2008 at 11:43 am

      Nice article! We are always interested it getting the word out on how much you can save with compact fluorescent bulbs.

    • 2 Will Writes, Will Whines // Apr 2, 2009 at 7:06 am

      […] Calculating the Financial Benefits of Compact Fluorescent Light bulbs (CFLs): the case of a condo bu… […]

    • 3 Merkley-Lugar Introduce Energy Smart Legislation // Aug 4, 2009 at 1:27 pm

      […] Following up on an announcement made months ago, Senator Jeff Merkley (D-OR) and Senator Richard Lugar (R-IN) introduced legislation that  will help address both the CtB v CtO and the affordability issues. […]

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      […] Calculating the Financial Benefits of Compact Fluorescent Light bulbs (CFLs): the case of a condo bu… […]

    • 5 Solving the energy wasting dilemma of residential master metering // Apr 3, 2011 at 5:07 pm

      […] waste and not the “most [cost] effective thing” to do.  For example, using the same building, CFLs replacing incandescents are a much faster payback item. Now, to be clear, window replacement has many non-directly fiscal payback items — such as […]

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      […] a related piece, see: Calculating the Financial Benefits of Compact Fluorescent Light bulbs (CFLs): the case of a condo bu… Share and […]

    • 7 Steve King revels in wasting taxpayers’ money // Feb 13, 2012 at 12:51 pm

      […] an idea of how much, here is a discussion of CFLs in a condominium Let us take a very simple case for a light bulb pay back period. Assume that a light is on 40 hours […]

    • 8 Where’s the front-page correction? WashPost Fails Math, Fails Ethics, Fails Readers // Mar 10, 2012 at 10:42 am

      […] in additional examples, Calculating the Financial Benefits of Compact Fluorescent Light bulbs (CFLs): the case of a condo bu… and Holiday Lighting … scrooge or savior? (an annual refrain …). Share and […]

    • 9 Maryland, My Community Electric Utility save $s for My Master Metered Community // May 30, 2012 at 9:18 am

      […] I’d attempted to get our board to provide at least one CFL to every resident…an expenditure I figured would be paid off in savings in less than two months. They weren’t interested. Then I tried to figure out how to get my neighbors to take the […]

    • 10 Master Meters: Who pays? And, why pay? // Jun 1, 2012 at 9:07 pm

      […] know how seriously fast they could achieve savings and that those savings could add up quickly.  Investing in 1000 CFLs, for example, to simply give out to residents could save a typical condo asso….  Hmmm … how many condo owners think that they have $10,000 to throw away … year after […]

    • 11 “CFLs cost less …” // Jul 26, 2012 at 7:48 am

      […] While CFLs cost more to buy (perhaps $2-3 bulb vs $0.25-$0.50 for an incandescent), they cost far less to own due to their 73% lower electricity use and their 5-10 times longer expected life. Dependent on usage, payback time for that extra CFL purchase price can be measured in weeks. […]

    • 12 Nick // May 7, 2014 at 12:05 pm

      Good analysis of the “real” cost of CFLs. It might be a no-brainer option for consumers, but it’s a lot more complex as the scale of the lighting project increases.