Sunday 15 February 2009

I'm happy to save the planet - if the government (taxpayer) is paying for it

Our 315L electric water heater is pretty economical, as off-peak electricity only costs 5.2c per kWhr, but it still accounts for almost 1/3 of our total electricity consumption and a significant part of our quarterly electricity bill. Since the hot water tank is at least eight years old, which is close to the age at which they are prone to start leaking due to corrosion, I'm looking at replacing our existing system with a new "heat pump" system. A 315L domestic heat pump water heater is very expensive to purchase compared to a traditional electric water heater, costing around $3600, but the Federal government recently increased the rebate available for such systems from $1000 to $1600 and there is also a state government installation rebate and the value of the systems RECS rating which all together should reduce the purchase cost to around $300. Installation costs should be similar to that for a conventional system, so due to the government rebates the heat pump should pay for itself through reduced electricity bills in just two or three years.

I'll double check my figures and the fine print relating to the state and federal government rebates before placing an order, but it appears that the ROI on buying a heat pump is very attractive - but only due to the government rebates available. It's very nice that I can help save the planet (supposedly) by reducing our greenhouse emissions AND save money by doing so, but I'm not sure that this rebate program is the most effective use of taxpayer funds to reduce CO2 emissions.

The other government rebate available is $8,000 towards a $13,000 roof-top solar polar grid-feed system. I'm not sure that our house is suitable for such a system, due to the large tree in our front yard casting significant shadow on part of the roof. Also, even with the rebate such a purchase doesn't make a whole lot of financial sense - it would only generate enough power to satisfy around 1/4 of our electricity use (1/3 if I go ahead and install a heat pump water heater). The annual saving on our electricity bill would therefore be around $250pa after paying out $4000 for the system. A 6.25% ROI wouldn't be too bad, but after deducting depreciation of around 4%pa (the system has a 25-year expected working life) it really isn't a very appealing investment. In addition, I suspect that the storage batteries used by the system won't last anything like 25 years before requiring expensive replacement. This is another government rebate that I suspect is rather wasteful. Photovoltaic technology is advancing rapidly, so I expect the cost of solar power generation systems such as this will plummet in coming years. If that turns out to be the case, the money spent on subsidising household solar power systems now would fund many more such systems if deferred for a few years. In fact, within a decade such systems may be cost-effective even without any government subsidy.

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Anonymous said...

Hey there. Well, this is an excellent example of lowest common denominator thinking. This approach and others like it pretty much leaves the responsibility for our environment squarely on the shoulders of government i.e. "not me". It's the attitude that got us into this mess in the first place, and the shtuk is going to get deeper. Why not invest in the environment and do without that flat-screen TV? Or whatever ... don't scrablle around in the detail - take some responsibility and make the investment regardless of the ROI. The more you do this, the better you will sleep at night and the more your kids will respect you (and, come to think of it, the more YOU will respect you) when they ask "what did you do?". Don't make your answer "hey, I kept on polluting/screwing the environment/whatever because the better option didn't figure in my ROI calculations" ... said...

I did my part back in the 80s when the "greenhouse effect" was part of my undergraduate course in environmental chemistry - I quite the WWF when they morphed from protecting endangered species and tried to compete with Greenpeace by going anti-nuclear. If Australia had developed some nuclear power generation capacity in the 70s and 80s our CO2 emissions would be much less than they are with our reliance on coal-fired power stations. Of course, being in the "irrational" environmentalist camp you will also consider nuclear power to be the work of the devil... ;)

Anyhow, my point was that government spending should be directed where it is most cost-effective. At this time stopping land clearing and reforestation would be much more cost effective. Start spending on solar power generation when the technology makes economic sense. At this time money should still be going into R&D for photovoltaic technology, NOT for paying 2/3 of the cost of an uneconomic system. After all, each $8000 the government spends to move 1/4 (~$300) of my annual electricity use from coal-fired power to household solar power, could probably pay for 10 houses to go 100% solar in 5 or 10 years time.

The "government" isn't a bottomless pit of money obtained out of thin air - government funding for environmental improvements all comes from tax revenue, which is a finite resource. Each dollar can only be spent once - I just want to see it spent in the most cost-effective way.

Anonymous said...

OK, so just use less. USE LESS. If you're not happy with ROI on PV or whatever, just make inroads into not using so much.

You wrote:
"being in the "irrational" environmentalist camp you will also consider nuclear power to be the work of the devil"

1. I'm not irrational at all - where did you get that idea?
2. I'm not in any camp in particular. However, it's RATIONAL to want to do something about the environmental issue.
3. I'm not Australian.
4. Regarding nuclear, it's an engineer's idea. Engineers think that systems and rules will prevent accidents or issues with nuclear power. Well, if you've lived in Europe for some time (like I have), you'll discover that politics makes nuclear unsafe. Period. The fallout from nuclear mistakes and problems is too great to go with it. Hot rocks, wind, PV and wave are all sustainable.

Lastly, you did your part? Oh yeah? It's a lifelong contribution, not just a few donations here and there to some enviro organisation.

Come on, set your kids some standards you can be proud of and they can aspire to! said...

I think the preferable goal is to reduce the amount of CO2 produced per unit of power generation, not to simply use less. The world is inevitably going to use MORE power in future, as the emerging economies raise living standards closer to those of the developed economies.

It's irrational to not pick the most cost-effective method of reducing CO2 emissions. If your goal is to use government funding to reduce CO2 emissions, you want to reduce CO2 by the most tonnes per dollar of taxpayer money expended.

BTW, you can't say that you are "not in any camp in particular" and then go on to state that in you believe that "politics makes nuclear unsafe. Period. The fallout from nuclear mistakes and problems is too great to go with it." If that's not being in the anti-nuclear camp, I don't know what is ;)

I believe that nuclear isn't particularly more dangerous (overall) that alternative power generation methods due to my "engineer's" mind-set. I studied chemical engineering before switching to applied chemistry and becomming a Chartered Chemist (amongst other things), so I tend to believe what I read in peer-reviewed academic and technical journals rather than Greenpeace pamphlets.

In case you're not aware, hot rocks, wind, PV and wave power are also "engineer's ideas".

As for doing my part, I've invested in several hectares of renewable timber planations, so I'm probably a net SINK of global CO2. If you're focused on just reducing production of CO2 by using LESS, you're still a net SOURCE of CO2 pollution.

pohutukawa said...

Yes of course - efficiency of what we do use combined with using less is going in the right direction. Carbon usage needs to be taxed. Period.

Regarding "camps", I meant that I wasn't a member of a political party, lobby group or "movement" as such. I am anti-nuclear and the environment is right up there in terms of my priorities.

Regarding nuclear, the potential damage from problems is huge and long-lasting. None of the other alternatives mentioned have this issue. I had assumed that you understood this! The engineers involved in nuclear installations that have had accidents were almost all in denial as to the risks and were in the main hugely surprised when the accidents occurred.

As for engineer's ideas, red herring! It doesn't take an engineer to come up with the idea of generating power from alternative energy sources. Yes, we need to tell engineers to come up with solutions, but they don't have a monopoly on ideas by any means.

You're a bright guy - it's great you're thinking about these issues - most people don't! :O)