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Getting to Zero: The Economics of Transitioning to Clean Energy

By: Scott King

 

This finance assignment, “Getting to Zero: The Economics of Transitioning to Clean Energy,” is designed to delve into the financial and environmental implications of transitioning a suburban household to clean energy. You will be conducting a comprehensive analysis of converting a 5,000 sq. ft. home located in Longmont, Colorado, along with its two gasoline-powered vehicles, to zero carbon emissions over a 25-year period. Your analysis will involve estimating the initial investment and ongoing costs of installing rooftop solar, heat pumps for heating and cooling, heat pumps for hot water, and the acquisition of two electric vehicles including their charging infrastructure. Moreover, you’ll be tasked with calculating the operational savings, conducting a detailed financial analysis (calculating NPV, IRR, and Payback Period), and assessing the environmental impact in terms of carbon emissions reduction. The assignment requires meticulous financial modeling, cost and savings calculations, and a critical evaluation of the economic feasibility and potential barriers to adopting clean energy solutions. Your findings and recommendations will be presented in a comprehensive report and a succinct presentation, supported by detailed financial models and calculations in Excel spreadsheets. With the given assumptions of energy use before electrification, this assignment offers a realistic scenario for assessing the transition to a sustainable, energy-efficient lifestyle.

Before embarking on the journey of transitioning to a fully electrified and environmentally sustainable household, it’s crucial to establish a clear and accurate baseline of the current energy consumption and associated CO2 emissions. This assessment serves as the foundation for understanding the impact of the proposed clean energy solutions. The household in question is a spacious 5,000 sq. ft. residence located in Longmont, Colorado, with significant energy demands stemming from various sources. The baseline assumptions include the usage of two gasoline-powered vehicles, with an average annual mileage of 13,000 miles per vehicle and an average fuel efficiency of 25 miles per gallon. The home’s heating requirements are met through the combustion of natural gas, amounting to 800 Therms annually for space heating and an additional 200 Therms for water heating. Furthermore, the household’s electrical needs accumulate to a substantial 12,000 kWh per year. The table below comprehensively outlines the energy usage and the corresponding annual CO2 emissions, providing a quantifiable snapshot of the household’s environmental footprint prior to the implementation of clean energy interventions.

 

 

 

Baseline Home Energy Usage and Associated CO2 Emissions 

 

Energy Source Energy Usage Equivalent Energy (kWh) CO2 Emissions Factor Annual CO2 Emissions
Gasoline (Cars) 2 cars x 13,000 miles/year, 25 mpg 9,735 kWh/year 8.887 kg CO2 per gallon 9.24 metric tons/year
Home Heating 800 Therms/year 23,440 kWh/year 5.3 kg CO2 per Therm 4.24 metric tons/year
Hot Water Heating 200 Therms/year 5,860 kWh/year 5.3 kg CO2 per Therm 1.06 metric tons/year
Electricity 12,000 kWh/year 12,000 kWh/year 0.4 kg CO2 per kWh (hypothetical for Xcel Energy) 4.8 metric tons/year
Total 51,035 kWh/year 19.34 metric tons/year

This baseline serves as the benchmark against which the effectiveness and the environmental benefits of the clean energy transition will be measured, ultimately guiding the analysis towards a comprehensive understanding of the financial and ecological implications of such a transformative endeavor.

Finance Assignment: “Getting to Zero: The Economics of Transitioning to Clean Energy”

Overview:

Climate change is one of the defining challenges of our time, and transitioning to clean energy is a crucial part of the solution. This assignment will explore the financial implications of converting a household to clean energy over a 25-year period.

Objectives:

– Understand the financial costs and benefits of transitioning to clean energy.

– Apply financial analysis techniques to real-world applications.

– Evaluate the long-term economic impact of sustainable investments.

Scenario:

You are given the task of transitioning a household to zero carbon emissions. The household consists of a 5,000 sq. ft. home in Longmont, Colorado, and two gasoline-powered vehicles. Your goal is to calculate the 25-year cost and savings of implementing the following clean energy solutions:

1. **Solar Panel System Installation**

2. ** Heat Pumps for Heating, Cooling, and Hot Water**

3. **Two Electric Vehicles and Charging Infrastructure**

Assignment Tasks:

1. **Initial Cost Estimation**:

– Research and estimate the initial costs of the solar system, the heat pumps, electric vehicles, and chargers.

2. **Operating and Maintenance Cost Analysis**:

– Estimate the operating and maintenance costs for the systems and vehicles over 25 years.

3. **Savings Calculation**:

– Calculate the savings from not purchasing gasoline and natural gas. Consider the escalation of energy prices over time. (Can use 2% per annum, applied at the end of the year)

4. **Financial Analysis**:

– Determine the Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period for the investments.

4. **Environmental Impact Assessment**:

– Quantify the reduction in carbon emissions as a result of the transition.

5. **Report and Presentation**:

– Prepare a detailed report and presentation that includes:

– Methodology for cost and savings calculations.

– Financial models including cash flow projections.

– Analysis of the financial viability of transitioning to clean energy.

– Discussion on the potential barriers and economic incentives to promote clean energy adoption.

Deliverables:

– A written report detailing your findings and analysis.

– A presentation summarizing the key aspects of your report.

– Excel spreadsheets with your financial models and calculations.

Note: This assignment was developed with the help of the Mission Zero AI Home Energy Advisor.