**5. Results and discussion**

In this section of the chapter, energy savings resulting from the replacement of existing air conditioning units with new ones will be presented along with the economic impact from NPV, gross domestic product, and employment perspectives. The presented results will be also discussed in details in this section.

*Energy Savings Analysis of a Recommended Residential Air Conditioning Incentive Program… DOI: http://dx.doi.org/10.5772/intechopen.82634*

### **5.1 Energy savings**

the EER value for each temperature point above T1 level needs to be identified first in order to be able to calculate the EER's percent reduction at each temperature value above T1. Hence, a linear regression model was applied for different Al-Zamil air conditioning window and split units with diverse EER values at T1. Then, the calculated weighted average value was utilized in energy savings calculations. The

where Y is the dependent variable (energy efficiency ratio of the air conditioner), X is the independent variable (outside air temperature), b is the slope of the

the weighted average EER drop for a given temperature above T1 value is around 2.1% per degree temperature. Thus, new window units' EER values (adjusted by taking into account EER degradation factor) were computed as

After performing the calculations on the different models, it was found that

**Window Year 2018 2019 2020 2021 2022 2023 2024 2025** Adjusted EER 9.66 9.85 10.51 10.72 10.94 10.94 10.94 10.94

Similarly, new split units' EER values (adjusted by taking into account EER

**Split Year 2018 2019 2020 2021 2022 2023 2024 2025** Adjusted EER 11.7 11.93 12.94 13.2 13.46 13.46 13.46 13.46

Having said that, the units subject to replacement (10 years old or more) are assumed to have the below EER values at T1. In order to be conservative with the calculation, T1 values for old units are used in calculating the corresponding energy

**EER at T1 for units subject to replacement Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025** Window 7 7 7 7 7 7 7 7 7 7 Split 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5

In this section of the chapter, energy savings resulting from the replacement of existing air conditioning units with new ones will be presented along with the economic impact from NPV, gross domestic product, and employment perspectives. The presented results will be also discussed in details in this

consumption without considering the degradation with temperature:

*Y* ¼ *a* þ *X* � *b* (6)

regression analysis was following the below equation:

degradation factor) were calculated as follows:

line, and a is the y-intercept.

**5. Results and discussion**

section.

**56**

follows:

*Energy Policy*

In order to quantify the overall savings of the program, the calculation started with quantifying the saved energy per unit going from a low-level EER to the proposed level at each specific year. Then, the saved energy per unit was multiplied by the replaced stock at that year in order to get the overall yearly savings. This approach was applied for both window and split units as can be comprehended from the below equations and tables:

$$\text{EER} = \frac{\text{Desired Output} \text{(i.e.cooling load in } \frac{\text{BTU}}{\text{h}}\text{)}}{\text{Required Input} \text{(i.e.electric power in W)}} \tag{7}$$

Knowing that 1 TR equals 12,000 BTU/h and the weighted average tonnage (TR) of the AC units is 2.0176,

Annual KWh of Air Conditioner <sup>¼</sup> <sup>12</sup> � TR � Average Annual Operating Hours EER

(8)

*• Window*


*• Split*


#### *Energy Policy*

As can be seen from the above tables, the energy savings from window units starts at 1.13 TWh in the first year of the program and reaches 1.47 TWh on year 2022 onward. Similarly for split units, the savings starts from 0.61 TWh in 2018 and level at 0.83 TWh on year 2022 onward. The savings are higher from window replacements mainly due to the fact that the number of replaced units is higher than those of split units on yearly basis.

**5.2 Economic analysis**

different scenarios.

units

*5.2.1 Net present value (NPV) and sensitivity analysis*

*DOI: http://dx.doi.org/10.5772/intechopen.82634*

**Type \$ Billion** PV cost (i = 5.3%) 2.74 PV savings (i = 5.3%) 16.44 NPV (i = 5.3%) 13.7

75% of the cost, and the results will be as follows

**Type \$ Billion** PV cost (i = 5.3%) 2.03 PV savings (i = 5.3%) 16.44 NPV (i = 5.3%) 14.40

Hence, almost no contribution from the government

**Type \$ Billion** PV cost (i = 5.3%) 0 PV savings (i = 5.3%) 16.44 NPV (i = 5.3%) 16.44

on the fee rates on non-efficient equipment.

**59**

Using 5.3% as commercial discount rates over 20-year impact period of new equipment, the net present value (NPV) summaries are shown below for three

*Energy Savings Analysis of a Recommended Residential Air Conditioning Incentive Program…*

1. Assuming the government will take the burden of the full cost of the new

2. Based on the online survey results, a weighted average of 25% of the cost can be absorbed by the households. Hence, the government will take care of only

3. The capital cost will be transferred solely to non-efficient equipment buyers.

The third scenario basically uses the "feebate" system where the government transfers the whole cost to consumers, and hence the government will not bear the capital cost of the equipment. They will only need to pay for administration cost although even the administration cost can be transferred to consumers depending

In summary and as can be seen from the above tables, the NPVs in all the three scenarios are positive with great values, and hence proceeding with the program is vital for the Saudi government at this stage and with any of the above scenarios. Thorough assessment of those scenarios and others shall be performed prior to program deployment and the program administrator shall critically evaluate several factors including, but not limited to, current market situation, manufacturer willingness, retailer/distributer readiness, government funding availability, etc.

A sensitivity analysis has been applied to the NPVs of all the three scenarios to check how sensitive the results are to several selected input variables that have been


The savings from window and split units are added together in order to get the overall yearly savings along with the cumulative savings.

As per Electricity and Cogeneration Regulatory Authority (ECRA) open data, the kingdom consumed, in 2017, around 298 TWh of electricity, while 143 TWh of this consumption was in the residential sector alone [30]. Therefore, the cumulative savings from the program would represent 6% of the 2017 kingdom's total electricity consumption and 12% of the residential sector. Of course this percent would reduce over time as the consumption of the kingdom is expected to increase progressively mainly due to more electrification, population growth, and economic development, yet still the numbers are considerable. Moreover, this suggested program would result in a reduction of a yearly average 7.5 million metric ton of CO2 emissions which is basically equivalent to removing 1.38 million cars from the streets or planting more than 27 million trees.

Furthermore, and assuming 80% utilization rate, the cumulative saved energy of 17.11 TWh by 2025 is equivalent to a power plant with around 2.5 GW of capacity. This 2.5 GW represents around 3% of 2017 kingdom's total capacity. The proposed program will help basically in shaving peak loads, reducing energy growth rates in addition to the avoided capital.

It is worth mentioning that the minimum annual SAR savings per AC unit for residential customer varies from SAR 248 to 324 per window unit and from SAR 203 to 432 per split unit depending on EER levels between new and replaced units.

*Energy Savings Analysis of a Recommended Residential Air Conditioning Incentive Program… DOI: http://dx.doi.org/10.5772/intechopen.82634*

### **5.2 Economic analysis**

As can be seen from the above tables, the energy savings from window units starts at 1.13 TWh in the first year of the program and reaches 1.47 TWh on year 2022 onward. Similarly for split units, the savings starts from 0.61 TWh in 2018 and level at 0.83 TWh on year 2022 onward. The savings are higher from window replacements mainly due to the fact that the number of replaced units is higher than

The savings from window and split units are added together in order to get the

**Saving in TWh from splits**

As per Electricity and Cogeneration Regulatory Authority (ECRA) open data, the kingdom consumed, in 2017, around 298 TWh of electricity, while 143 TWh of this consumption was in the residential sector alone [30]. Therefore, the cumulative savings from the program would represent 6% of the 2017 kingdom's total electricity consumption and 12% of the residential sector. Of course this percent would reduce over time as the consumption of the kingdom is expected to increase progressively mainly due to more electrification, population growth, and economic development, yet still the numbers are considerable. Moreover, this suggested program would result in a reduction of a yearly average 7.5 million metric ton of CO2 emissions which is basically equivalent to removing 1.38 million cars from the

Furthermore, and assuming 80% utilization rate, the cumulative saved energy of 17.11 TWh by 2025 is equivalent to a power plant with around 2.5 GW of capacity. This 2.5 GW represents around 3% of 2017 kingdom's total capacity. The proposed program will help basically in shaving peak loads, reducing energy growth rates in

It is worth mentioning that the minimum annual SAR savings per AC unit for residential customer varies from SAR 248 to 324 per window unit and from SAR 203 to 432 per split unit depending on EER levels between new and replaced units.

 1.18 0.65 1.83 3.57 1.37 0.77 2.13 5.7 1.42 0.8 2.22 7.92 1.47 0.83 2.3 10.22 1.47 0.83 2.3 12.52 1.47 0.83 2.3 14.82 1.47 0.83 2.3 17.11

**TWh (yearly)**

**TWh (cumulative)**

those of split units on yearly basis.

*Energy Policy*

**Year Savings in TWh from**

**windows**

streets or planting more than 27 million trees.

addition to the avoided capital.

**58**

overall yearly savings along with the cumulative savings.

2018 1.13 0.61 1.74

### *5.2.1 Net present value (NPV) and sensitivity analysis*

Using 5.3% as commercial discount rates over 20-year impact period of new equipment, the net present value (NPV) summaries are shown below for three different scenarios.

1. Assuming the government will take the burden of the full cost of the new units


2. Based on the online survey results, a weighted average of 25% of the cost can be absorbed by the households. Hence, the government will take care of only 75% of the cost, and the results will be as follows


3. The capital cost will be transferred solely to non-efficient equipment buyers. Hence, almost no contribution from the government


The third scenario basically uses the "feebate" system where the government transfers the whole cost to consumers, and hence the government will not bear the capital cost of the equipment. They will only need to pay for administration cost although even the administration cost can be transferred to consumers depending on the fee rates on non-efficient equipment.

In summary and as can be seen from the above tables, the NPVs in all the three scenarios are positive with great values, and hence proceeding with the program is vital for the Saudi government at this stage and with any of the above scenarios. Thorough assessment of those scenarios and others shall be performed prior to program deployment and the program administrator shall critically evaluate several factors including, but not limited to, current market situation, manufacturer willingness, retailer/distributer readiness, government funding availability, etc.

A sensitivity analysis has been applied to the NPVs of all the three scenarios to check how sensitive the results are to several selected input variables that have been applied across all the scenarios. Five input variables were selected for the sensitivity analysis, and they are air conditioner cost, assumed EER values of the existing air conditioner fleet, assumed EER values of the new air conditioner fleet, utility discount rate, and the average annual operating hours of air conditioners. The applied variabilities to the input variables were 25% for each variable. The below table summarizes the results of the analysis.

The input–output analysis ("I-O") used in the analysis is a form of economic analysis based on the interdependencies between economic sectors. This method is most commonly used for estimating the impacts of positive or negative economic

*Energy Savings Analysis of a Recommended Residential Air Conditioning Incentive Program…*

This chapter investigated the savings from a residential air conditioning incentive program rather than detailing the design of the program as this needs specialized entities who should evaluate different factors before designing such program. The proposed 8-year program included residential air conditioning units, namely, window and split, where participants are provided with efficient AC units as a substitute to their existing low efficiency AC units. The program was designed to replace 5.75 million AC units (25% of estimated 2016 stock) over an 8-year period. The proposal was presented under three different scenarios when it comes to the capital cost handling where the government will take care of all the capital cost, 75%, and none of the capital cost in scenarios 1, 2, and 3, respectively. The cumulative estimated savings from the program adds up to 17.11 TWh by the year 2025. Moreover, this suggested program would result in a reduction of a yearly average of 7.5 million metric ton of CO2 emissions which is basically equivalent to removing 1.38 million cars from the streets or planting more than 27 million trees. Furthermore, the expected NPVs from the program are substantial, and they are \$13.7 billion, \$14.4 billion, and \$16.4 billion under the three different scenarios. From the economics perspective, the program will add an average of \$0.5 billion per year to the kingdom's GDP over the duration of the program. It was also estimated that around

2000 direct and indirect jobs will be created throughout the duration of the

As incentive programs regularly take care of the initial investment cost of energy-efficient products and hence implicate significant capitalization, the program administrator shall evaluate different experiences from developed and developing nations to instigate the development of new funding mechanisms to suit unique local circumstances such as Saudi Arabia. In addition, such programs will support the country's current efforts to improve the permeation of energy-efficient equipment in the Saudi market. Subsidy programs are essential to balance the present compulsory standards by increasing market permeation of equipment that have better energy performance than current standards requirement, therefore paving the road for further increase in standards stringency in the future. Moreover, the program administrator shall comprehend the fact that the success of such program depends heavily on an outstanding plan in place before the program initiation. The plans shall include monitoring and verification plans along with continuous evaluation plans in place in which a reserved budget for those purposes

The author would like to extend sincere thanks to Hussien Mohammad, from Saudi Aramco, for his support in obtaining bin weather data for several Saudi cities along with his support in reviewing the EER degradation analysis. Also, the author would like to thank Aabed Saber, from Saudi Aramco, for his contribution in reviewing the chapter and providing useful insights especially concerning the

shocks and analyzing the ripple effects throughout an economy.

*DOI: http://dx.doi.org/10.5772/intechopen.82634*

**6. Conclusion**

program.

is crucial.

questionnaire.

**61**

**Acknowledgements**


It can be noticed that varying the EER values whether for the existing or new fleets has the biggest impact on the results, while the input variable with the least impact among the five is the air conditioner unit cost. It can be also noticed from the above table that the AC unit cost variable has no impact on scenario three results as in this scenario the capital cost is transferred to non-efficient air conditioner buyers with no contribution from the government. In summary, despite applying aggressive variabilities to key input variables in all the three scenarios, the results still show positive net present values for all the scenarios which indicate that this proposal is valid and also highly recommended for deployment in order to reap such huge benefits.
