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Cost-effectiveness analysis

Energy costs

The development of oil prices in the past

Fig. 1 (Animated graphic) shows the development of the prices for crude oil during the period from 1960 to 2006, which is mainly characterised by great fluctuations. However, there is also a clear upward trend, as shown by the regression curve drawn into the diagram. For a long time, all relevant authorities tended to agree that what may not be, that cannot be. High energy prices are not exactly a stimulus for the economy. This possibility should have been excluded from the very beginning. That reality is entirely different from pipe dreams, is very clear. Had the industry and society been seriously prepared for higher energy prices early enough, it would have had a lesser impact.

Oil prices will determine the price level for a long time to come

Even today, crude oil is still the most important source of energy in the world. It will remain dominant and will continue to define the energy prices for a long time to come. This is apparent from the work carried out by the International Energy Agency [IEA 2001] .

Determining factors for the price of oil

Of course, it is possible that oil prices may fall sharply next year. One of the features of this market, which is governed by speculation, is that it is almost unpredictable. Perhaps that is a good reason to reduce our dependence on it. Let us discuss this development based on the relevance of the reasons given for high prices in the past:

  • Production capacities are declining in Europe and North America - this trend is set to increase in the future.
  • Yukos (Russia), sabotage and attacks in Iraq - is this just a “current problem”? –can anyone guarantee safety in the future?
  • Increasing demand in China - this is just the beginning; and it is not only China's demand that is increasing. In the long and medium term, this will be the main driving force.
  • 4 hurricanes within 6 weeks (in 2004)- at the moment this is only a current problem; in 2005 there were more than 25 hurricanes; in 2006, before reaching the American mainland, most of the storms drifted off towards the north. But: increasing problems are expected in future due to climate change, with a demonstrably increased risk of extreme weather.
  • OPEC’s capacity limit - should be overcome in the medium term; but in the long term, there will be an overall capacity limit, see “peak oil”.

Fig. 1: Development of oil prices in the past and in future.

Conclusions for the energy price level in the future (see Fig. 1)

Thus we venture that there will be a continuation of the average energy price trend here; note that this is not a forecast but rather a substantiated extrapolation based on the analysis given previously. There won't be an exponential growth in the energy price as substitution potentials are available; but in the relevant time periods in which a new construction or a modernised building will require heating energy, the average prices for energy are hardly likely to be less than today's current prices. Interestingly, there is a consensus amongst economists again; nevertheless, the reasons for this are not really new. It was already expected that prices would increase, but it was not easy to predict when they would increase. It is even possible that the present above-trend prices will fall once more – the curve takes this into account.

What kind of energy prices should be expected? Including the annual utilisation factor (90%), the cost for heating amounts to 6.7 cents/kWh, based on an average oil price of around 60 cents/litre. In addition there are the costs for auxiliary energy (about 0.3 cents/kWh) and the variable share of the system costs (more than 1.6 cents/kWh). In total, average future heating costs of about 9 cents/kWh should be expected. The costs for CO2–retention have not yet been taken into account.)

What course of action should be taken?

The prospects wouldn't actually be very favourable if we had to rely on constant energy imports from the international market. Fortunately we don't have to rely on them: regionally generated energy substitutes are available at prices which are economically competitive even when compared with today's energy prices (energy from wood and biomass, wind power and hydropower for heat pumps). Unfortunately these energy sources are limited in scope – but that shouldn't be a problem because with better energy efficiency, it is possible to reduce the energy consumption by a factor of 4 (and more). Even that is cost-effective in relation to future energy prices.

The Passive House is an example of a particularly energy-efficient solution. Passive Houses necessitate somewhat higher investment costs when compared with ordinary new buildings, which is why well thought out financing is important. Working groups will address this issue at the International Passive House Conference.

See also


[IEA 2001] Internationale Energie Agentur: World Energy Outlook; IEA-Press, 1. edition, Oct. 2001
(International Energy Agency: World Energy Outlook)

basics/affordability/investing_in_energy_efficiency/cost-effectiveness_analysis.txt · Last modified: 2019/05/08 12:22 by cblagojevic