Economic feasibility for acquisition of efficient refrigerators in Brazil

Applied Energy xxx (2009) xxx–xxx

ARTICLE IN PRESS

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Applied Energy

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Economic feasibility for acquisition of efficient refrigerators in Brazil

Rafael Balbino Cardoso, Luiz Augusto Horta Nogueira *, Jamil HaddadEXCEN/UNIFEI, Universidade Federal de Itajubá – UNIFEI, Centro de Excelência em Eficiência Energética – EXCEN, Av. BPS 1303 Itajubá-MG, Brazil

a r t i c l e i n f o

Article history:Received 10 June 2008Received in revised form 12 March 2009Accepted 19 May 2009Available online xxxx

Keywords:Energy efficiencyRefrigeratorLabeling

0306-2619/$ - see front matter � 2009 Elsevier Ltd. Adoi:10.1016/j.apenergy.2009.05.025

* Corresponding author. Tel.: +55 35 3629 1442/10E-mail addresses: [email protected] (R.B. C

(L.A.H. Nogueira), [email protected] (J. Haddad).

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a b s t r a c t

Since 1993, the Brazilian National Program of Electricity Conservation has been developing the PROCELLabel Program, oriented towards helping consumers to buy more efficient home appliances. In this con-text, an energy savings of 1379 GWh and a reduction of 197 MW in the Brazilian demand in 2007 are esti-mated as resulting from efficiency labeling in refrigerators and freezers. This paper aims to evaluate theeconomic feasibility of purchasing labeled refrigerators instead of inefficient ones, from the consumer’spoint of view, considering actual market conditions and buying in cash or financing. The evaluation ofenergy saving was done for 22 different models of refrigerators and the economy was calculated consid-ering the retail price in the Brazilian market and two actual electricity tariffs, taking into account, respec-tively, high and low household electricity consumption. The effect of ambient temperature on refrigeratorperformance was evaluated in two conditions: according to the Brazilian standard for performance tests(32 �C) and using the average temperature of Southern Brazil (18 �C), the mildest region. The benefit inbuying labeled refrigerators was evaluated using the Internal Rate of Return and the Payback Time fora cash flow during the appliance life, estimated as 16 years. The results indicate that for cash purchase,for any electricity tariff and for both ambient temperatures studied, the consumers are economically ben-efited buying labeled refrigerators instead of less efficient models. For credit purchases, in the evaluatedconditions, high-tariff consumer typically gains selecting labeled refrigerator, on the other hand, for low-tariff consumer and in colder areas, it is economically advisable to buy less efficient appliances. Sensitiv-ity analysis of energy tariff and financing conditions are presented.

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Contents

1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 002. PROCEL Label Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 003. Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 004. Basic data for feasibility analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 00

4.1. Specific price of one-door refrigerators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 004.2. Average tariff of electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 004.3. Specific Consumption of one-door refrigerators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 00

5. Economic feasibility of acquisition of refrigerators with the PROCEL Label . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 006. Sensitivity analysis of economic feasibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 007. Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 00

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 00

1. Introduction

After decades of low cost energy, the oil shocks of the seventiesraised the price of energy and call the consumers attention to thelimits of conventional energy supply, fostering the increase of effi-

ll rights reserved.

00; fax: +55 35 3629 1265.ardoso), [email protected]

al. Economic feasibility for acqu

ciency in energy systems and stimulating the development of avariety of new and alternative sources of energy. Then, between1985 and 2002 some years of relief occurred in the energy market.However, in more recent times, the prices of energy have beensoaring again and the interest and concerns about energy issuesare high. Nevertheless, the rational use of energy and the reductionof energy losses are still low profile. It is important to stress thatthe energy question is not only a supply problem, but also, a de-mand hurdle to be overcome.

isition of efficient refrigerators in Brazil. Appl Energy (2009), doi:10.1016/

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2 R.B. Cardoso et al. / Applied Energy xxx (2009) xxx–xxx

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Currently the global efficiency of conversion of primary energyinto useful energy is estimated to be approximately one third. Inother words, from the natural resource to the final use, most of pri-mary energy is wasted in the conversion processes, mainly as heatat low temperatures. According to estimates for the next 20 years,due to the implementation of energy saving measures, the demandof primary energy may be reduced by 25–35% in industrializedcountries with significant economic gains. Reductions of energyconsumption in more than 40% were obtained in the transition ofEastern Europe and the former Soviet Union. In the developingcountries that present a high rate of economic growth as well asa large number of obsolete equipment, a potential improvementis even greater, between 30% and 45% [1].

In order to exploit the reduction of avoidable energy losses as ahidden source of energy, the basic routes are to promote changes incustomer energy behavior and habits, and introduce more efficientequipment, running the so called ‘‘Virtual Power Plants” [2].Among the actions to put into practice in order to obtain moreeffectiveness in energy use, such as financing efficient appliances,creating differential tariff, and informing customers, the adoptionof performance standards, setting levels of minimum efficiencyseems to be one of most effective and it is becoming broadlyadopted. The regular use of energy efficiency standards started inPoland in 1962, followed by France, which established patternsfor refrigerators and freezers in 1978 [3]. Moreover, other Euro-pean countries, including Russia, have introduced legislationimposing the use of labels with information about efficiency onappliances in the 1960s and 1970s [4]. The impact of efficiencystandards on domestic appliances was evaluated for United States,where refrigerators, which have their efficiency affected by DOEregulation, present the most significant contribution for energysaving in households [5].

In Brazil, it is worth mentioning some initiatives towards imple-menting energy conservation. Since the mid 1980s the NationalProgram of Electricity Conservation (Programa Nacional de Conser-vação de Energia Elétrica – PROCEL) and the National Program ofRationalization of the Use of Oil and Natural Gas Derivatives (Prog-rama Nacional de Conservação de Combustíveis e Derivados de Pet-róleo – CONPET), for electric energy and oil, respectively, have beenin operation. In 2001, the Federal Law 10.295/2001 was issued,establishing the Energy Conservation National Policy and the Ra-tional Use of Energy, including some specific guidelines to set min-imum levels of performance in energy systems and equipment.

More particularly with regards to energy efficiency labeling, theBrazilian Labeling Program (Programa Brasileiro de Etiquetagem –PBE) managed by the National Institute of Metrology, Normaliza-tion and Industrial Quality (Instituto Nacional de Metrologia eQualidade Industrial – INMETRO), has been orienting consumersat the moment to purchase home appliances and other energy con-suming equipment since 1985. In this label, the efficiency is usedto classify the equipment in five performance classes (A–E), withthe class A corresponding to the most efficient one. In addition tothis program, in 1993 the PROCEL created the PROCEL LABEL,which indicates the best performer equipments in each category,as it will be commented further.

The use of these efficiency labels have been done in voluntarybasis, but with the introduction of the Federal Law 10.295/2001,the adoption of minimum levels of efficiency has become progres-sively compulsory [6]. Up to the present, electric motors and thecompact fluorescent lamp have minimum levels of performancedefined according to this law. Other types of equipment are underconsideration of the Ministry of Energy and Mines in order to havealso minimum efficiency values.

Concerning economic aspects, in many cases the investment forimplementing energy efficiency measures is estimated to be lowerthan that needed for additional energy supply, since simple mea-

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sures of awareness of energy use or equipment replacement maylead to substantial savings without affecting the services providedby energy. However, it is important to verify if the expected savingreally occurred and, in this direction, one relevant issue to be dealtwith is the consistent evaluation of the actual feasibility of thesemeasures.

The purpose of this paper is to analyze the economic feasibilityfor the consumer to buy one-door refrigerators with the PROCEL La-bel in his first purchase. Such category of electric home applianceshas been chosen because it has a major participation (59%) in themarket of freezers and refrigerators in Brazil [7]. In this evaluationthe effect of the environment temperature and the age of refrigera-tor on the energy consumption were taken into account. The tem-perature influence on refrigerator performance is relevant and anadjustment should be introduced to consider the difference be-tween the actual operating conditions and the adopted in the stan-dardized tests. In fact, small changes in ambient temperature causeup to 20% variation in energy consumption in domestic refrigera-tors [8]. Regarding to performance degradation, it is estimated thataging effects in refrigerator insulation can reduce in 20% the effi-ciency of these appliances [9]. Combined with other consequencesof using time in refrigerators, such as efficiency decrease of com-pressors and fittings hardening, is expected an average reductionof 60% of refrigerator performance at the end of typical useful life,evaluated as 16 years, in the Brazilian conditions [10].

In the following topics, a brief review of PROCEL results is pre-sented, followed by an introduction of the methodology adopted,an evaluation of basic data, a presentation and discussion of basicresults, as well as their sensitivity analysis to the main economicvariables used.

2. PROCEL Label Program

By enlarging the PBE scope, the PROCEL Label Program waslaunched by PROCEL in 1993, as a voluntary program aiming at ori-enting consumers and encouraging manufacturing and commer-cialization of more efficient products as well. The criteria forgranting the Label and the basis for accomplishment of the wholeprocess were jointly defined with manufactures, consumers, repre-sented by the Brazilian Institute for Defense of the Consumer(Instituto Brasileiro de Defesa do Consumidor – IDEC) and theINMETRO. In 1995, the first products with the PROCEL Label ap-peared in the Brazilian market, namely: one-door refrigerators,two door refrigerators (refrigerators with a small freezer) and ver-tical freezer. Afterwards, considering their participation in the elec-tric energy consumption, the following categories were added:horizontal freezer, window air conditioners, three-phase electricmotors of up to 100 CV (and of up to 250 CV today), solar energyfor heating bathing, swimming pool and thermal reservoir water,home laundry machines, among others (Fig. 1).

Refrigerators and freezers were the first kind of appliance se-lected to receive the PROCEL Label because they are the main con-sumers of electricity in the Brazilian residential sector, accountingfor approximately 28% of the total consumption in 2007 [11]. Theimplementation of this Label in refrigerators and freezers allowedfor a reduction of 197 MW in the peak demand in 2007 and hassaved about 1379 GWh of electric energy accumulated in the last10 years, which represents about 16% of all economy ascribed tothe Program, as shown in the figure below (Fig. 2) [11].

Up to recently, the results of the PROCEL Label Program hadbeen assessed yearly using simple methodologies. In order to im-prove this evaluation, in recent times PROCEL has been promotingresearch in measurement and verification of results, as well asinvolving third part institutions as recommended by the interna-tional rules and directives. Besides, new parameters have been in-


Lighting65%

Refrigerators and Freezers

16%

Air Conditioners12%

Eletric Motors6%

Solar water heaters and reservoirs

1%

Fig. 2. Energy saving attributed to the PROCEL Label [11].

Table 1Evolution of the average energy use in Brazilian refrigerators (modified from [14]).

Year Annual energy consumption of new refrigerators (kWh/year)

1990 491.31991 485.51992 481.71993 477.91994 374.51995 351.61996 347.21997 343.01998 339.21999 334.92000 331.22001 322.32002 310.62003 281.72004 276.42005 270.4

Fig. 1. PROCEL Label and PBE Label [11].

R.B. Cardoso et al. / Applied Energy xxx (2009) xxx–xxx 3

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cluded to estimate their actual performance, such as climate influ-ence on the energy consumption of the equipment, models of for-mation of the park of equipment based on sales and scrapping, andthe reduction of efficiency along the equipment life. Also, the‘‘baseline” concept has been adopted to take into account the tech-nological evolution of the products and to allow for the estimate ofthe energy saving accumulated in their useful life, as illustrated inFig. 3. This more detailed evaluation follows basically the frame-work of International Performance Measurement and VerificationProtocol – IPMVP [12].

To apply this approach to the Brazilian market, the values ofrefrigerator efficiency have been obtained from PBE tests done onthe several models of refrigerators in the market, separated in cat-

CCoonnssuummppttiioonn ((kkWWhh//yyeeaarr))

Fig. 3. Typical specific consumption o


egories and stratified according to the internal volume and nomi-nal temperatures [13]. As summarized in Table 1, in the lastdecades a significant evolution of the energy efficiency in thenew models of Brazilian refrigerators has been observed [14].

It is estimated that in the last 20 years these actions have pro-duced a reduction of 47% in the specific electricity consumption.These levels are comparable to the 56% reduction observed in sim-ilar voluntary programs in the United States in the same period, asindicated in Fig. 4 [2].

The number of operating equipment (park of refrigerators) wasestimated based on the initial stock, as well as on refrigeratorssales and scrapping, as presented in Fig. 5, with results for thewhole country. Recently, other studies evaluating the refrigeratorspark in Brazil have been presented, using different approach butshowing basically the same total values [15].

Using the previous data, in Fig. 6 the estimated actual energysaving (1012 GWh in 2005) is presented, resulting from the differ-ence of energy consumption between a hypothetic park of refriger-ators without the PROCEL Label equipment (baseline) and theactual one, composed of equipment with and without such label.Also the maximum potential saving (1840 GWh), represents thedifference the estimated consumption a hypothetic and anotherpark of labeled refrigerator, is presented in this figure [11].

After the Federal Law 10,295 of 2001, also called the Energy Effi-ciency Law [16], allowing the Brazilian authorities to establishminimum rates of efficiency for energy systems and appliances,one believes that the energy efficiency labeling of freezers andrefrigerators will act as the first step to introduce these limits,encouraging more effective equipment manufacturing.

BBaasseelliinnee

BBaasseelliinnee wwiitthh tteecchhnnoollooggiiccaall eevvoolluuttiioonn

EEffffiicciieenntt mmooddeellss pprroommootteedd bbyy PPRROOCCEELL LLaabbeell

time

f representative refrigerators [7].


0%

10%

20%

30%

40%

50%

60%

1990 1993 2001 2005Year

United States Brazil

Fig. 4. Reduction of energy consumption of refrigerators – base year 1985 [2,11].

0

5

10

15

20

25

30

35

40

45

50

Mill

ions

of u

nits

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Year

Park of refrigerators - Brasil

Previous park17 years16 years15 years14 years13 years12 years11 years10 years9 years8 years7 years6 years5 years4 years3 years2 years1 yearnew

Fig. 5. Park of refrigerators – Brazil [7].


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3. Methodology

Although the PROCEL Label Program has been considered to beresponsible for significant impacts on the energy context, no de-tailed studies are available considering the economic impactaccording to the consumer point of view. Thus, in order to evaluatethe economic feasibility of acquisition in the first purchase of one-door refrigerators with the PROCEL Label in Brazil, the proposedmethodology is divided into three steps:

1. Estimate of specific price of refrigerators: According to a marketsurvey, an estimate of the specific price of one-door refrigera-tors (market price divided by refrigerator volume), taking thelabeling of energy efficiency into consideration and establishingaverage prices per performance class, should be obtained.


2. Evaluation of adjusted specific consumption of an average refriger-ator: Since the available values of the specific consumption ofone-door refrigerators result from tests conducted at the nor-malized temperature of 32 �C (as determined by the Brazilianstandard NBR ISO/IEC 17025/2001, in line with the ISO 7371/1995 Standard) [17], an adjustment to the actual annual aver-age environment temperatures must be introduced. In orderto simplify the analysis, an average refrigerator can be usedfor each performance class.

3. Analysis of the economical feasibility of acquisition of one-doorrefrigerator bearing the PROCEL Label: With the adjusted energyconsumption and the specific price, it is straightforward todetermine what performance class is economically moreattractive for the consumer on his first purchase, taking intoaccount the total costs associated with equipment price and


12.000

14.000

16.000

18.000

20.000

22.000

24.000

1986 1990 1994 1998 2002 2006

GWh

Actual Park (with and without PROCEL Label)

1.012 GWh1.840 GWh

Baseline Park (without PROCEL Label)

Potential Park (100% with PROCEL Label)

Fig. 6. Evolution of energy consumption in the park of equipment [7].

2.5

3

3.5

4

4.5

5

0 2 4 6 8 10 12Models of one-door refrigerators

Pric

e (R

$/lit

er)

Class A Class B Class C Class D Class E

Fig. 7. Specific price of one-door refrigerators related to performance class.


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the different tariffs of electricity for households for each regionin Brazil.

4. Basic data for feasibility analysis

4.1. Specific price of one-door refrigerators

To determine the average price of one-door refrigerators, mar-ket research referring to cost on various market retailers was con-ducted. The sources researched were four on-line WEB shops and

Table 2Specific average prices of one-door refrigerators.

Performance class Average specific price (R$/l)

A 3.68B 3.47C 3.39D 3.35E 3.32


five large retail shops. It is worth mentioning that a small variationin price among these stores was observed. For the 22 one-doorrefrigerators models evaluated, the average specific price of thiscategory of refrigerators was calculated and classified consideringthe Energy Efficiency Label granted by INMETRO, as indicated byFig. 7 and Table 2. Thus, it was possible to estimate the averageprice of a 300 L refrigerator, the most common capacity in the Bra-zilian households.

4.2. Average tariff of electricity

The Brazilian energy tariffs are defined by ANEEL, the regulatorybody of electricity industry. To determine the average electricitytariff for each region, the ANEEL tariff database for the Brazilianutilities was used [18]. The taxes charged in electricity (assumedas 6% for federal taxes and 24% for VAT taxes) were included andtwo groups of consumers were considered, as a function of theirmonthly electricity consumption: up to 200 kWh and greater than200 kWh. The first group pays lower rates, as a kind of social aid forlow-income families. These data are presented in Table 3, making itpossible, to estimate the average electric energy tariff for each re-


Table 3Residential tariff for Brazilian utilities, including taxes (R$/kWh) [18].

Region Utility Tariff up to 200 Tariff higher than 200

South CELESC 0.311 0.453AES 0.286 0.416CEEE 0.276 0.401COPEL 0.251 0.366

Southeast Ampla 0.321 0.541Light 0.304 0.456CENF 0.284 0.426Eletropaulo 0.253 0.351Bandeirante 0.320 0.444EEB 0.319 0.431Elektro 0.387 0.537CEMIG 0.367 0.687

Center west CEMAT 0.323 0.470Elektro 0.387 0.537CEB 0.260 0.357

Northeast Energipe 0.306 0.443SAELPA 0.337 0.503Borborema 0.337 0.503COSERN 0.276 0.411

North Celtins 0.421 0.611UHENPAL 0.404 0.589

Table 4Average cost of energy tariff, including taxes (R$/kWh).

Region Consumption range

6200 kWh/month >200 kWh/month

South 0.281 0.409Southeast 0.319 0.484Center west 0.323 0.455Northeast 0.314 0.465North 0.323 0.455

Fig. 8. Annual average ambient temperature [19,20].


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gion of the country, for each group of consumers, as indicated inTable 4.

4.3. Specific Consumption of one-door refrigerators

For each performance class, the specific consumption of anaverage refrigerator was defined, from the results of tests con-ducted in 22 refrigerators, as indicated in Table 5.

To adjust the results of standardized tests of refrigerators donein closed rooms at test temperature of 32 �C for other tempera-tures, the expression below [11] was utilized.

CC ¼ CN �Tamb � 5

27ð1Þ

where CC is the actual consumption of the refrigerators, CN the stan-dardized consumption, at ambient temperature of 32 �C and Tamb isthe annual average temperature of the region considered.

Table 5Set of evaluated models and standardized specific consumption of one-doorrefrigerators (adapted from [14]).

Performanceclass

Numberofmodels

Lower specificconsumption(kWh/l year)

Upper specificconsumption(kWh/l year)

Average specificconsumption(kWh/l year)

A 11 0.78 0.80 0.79B 3 1.04 1.07 1.06C 3 1.14 1.18 1.16D 2 1.24 1.24 1.24E 3 1.30 1.32 1.31


The annual average temperatures were estimated from geo-graphic meso-region annual temperature [19], weighted by therespective population [20]. The results are presented in Fig. 8.

From the specific consumption of refrigerators, evaluated atstandard condition and the annual average temperature, consider-ing Eq. (1) as well, it is possible to estimate the adjusted annualspecific consumption of refrigerators for each performance classand region, as indicated in Table 6. Among these values, the lowestannual average ambient temperature corresponds to 18 �C, esti-mated for the south region, where refrigerators present lower en-ergy consumption.

5. Economic feasibility of acquisition of refrigerators with thePROCEL Label

After evaluating the energy consumption, electricity tariffs andrefrigerator prices for different performance classes and scenarios,and assuming 16 years as the useful life of these equipments [10],it was possible to estimate the economic feasibility of acquisitionof more efficient refrigerators using as indicators the Internal Rateof Return – IRR and the Payback Time. The IRR assesses if the en-ergy economy is enough to pay the price difference between themore efficient and the less efficient equipment at an attractive rate,in the case in study the Minimum Attractive Rate of Return, MARR,assumed as the Brazilian Treasury bonds rate, equal to 6.7% in the2007. In this case, the Payback Time represents the period of timerequired to pay the marginal investment in more efficient refriger-ator with the energy economy. Particularly with reference to buy-ing conditions, two purchase situations were analyzed: cash and

Table 6Adjusted specific consumption of one-door refrigerators – kWh/l year.

Performance class Region

South Southeast Center west Northeast North

A 0.38 0.50 0.54 0.58 0.59B 0.51 0.68 0.72 0.77 0.79C 0.56 0.74 0.79 0.85 0.86D 0.60 0.79 0.84 0.90 0.92E 0.63 0.83 0.89 0.95 0.97


Table 8Internal Rate of Return for credit purchase of more efficient refrigerators.

Consumer Low-tariff High-tariff

Class Standard (%) South region (%) Standard (%) South region (%)

A and B 18.20 1.70 30.40 7.81A–C 17.90 1.60 30.20 7.70A–D 19.80 2.70 33.20 9.00

Table 9Payback Time for cash purchase of more efficient refrigerators.


Class Standard(years)

South region(years)

Standard(years)

South region(years)

A–B 2.9 7.7 1.9 4.8A–C 2.9 7.7 1.9 4.9A–D 2.7 7.1 1.8 4.5

Table 10Payback Time acquired by refrigerator credit purchase more efficient.


Class Standard(years)

South region(years)

Standard(years)

South region(years)

A–B 6.67 24.25 4.33 9.26A–C 6.68 24.68 4.34 9.32A–D 6.15 19.96 4.03 8.17


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credit, with the respective cash flows presented at Fig. 9. For creditpurchase was adopted financing conditions representative of ac-tual Brazilian conditions, with a 20% annual interest rate for 36monthly payments, which means a 3 years term.

The IRR values, respectively, for high-tariff consumer (>200kWh/month) and low-tariff consumer (6200 kWh/month) are pre-sented in the following tables. These values were calculated fortwo ambient temperature situations: 32 �C and 18 �C, respectively,representing the standard condition and the south region average.As indicated in Table 7, for cash purchase, all consumers have eco-nomic benefits in acquiring more efficient refrigerators, since theIRR is greater than the MARR in all cases. On the other hand, as pre-sented in Table 8, the situation is not so clear for credit purchase,when for low-tariff consumer in south region the results indicatethat is preferable to buy less efficient refrigerator.

The Payback Time for a discounted cash flow was calculated bythe following equation:

n ¼ lnðð1� DPÞ=E:iÞlnð1þ iÞ ð2Þ

where n is the Payback Time, DP the price difference between clas-ses’ equipment more efficient and less efficient, E the economy forenergy save of equipment more efficient (R$) and i is the Interestrate (equal MARR for cash pay and 20% for credit pay).

Considering both standard and south region condition for per-formance evaluation, Table 9 shows that for cash purchase the Pay-back Time for low-tariff consumer are attractive, varying between1.9 and 4.8 years. Adversely, as presented in Table 10, low-tariffconsumers of the south region buying financed more efficientrefrigerators have much longer and less attractive Payback Time.

From Table 10 can be concluded that buying labeled refrigera-tors are effectively unattractive for low-tariff consumers living inthe south region, because the Payback Time to amortize the pricedifference between a refrigerator of this class and other class (B

1° Situation: Cash purchase

........ ...........

E E E E

ΔP

10 2 3 16

0........ ...........

E E E E

1 2 3 16

C C C

E

4

2° Situation: Credit purchase (3 years)

E = Energy economy ($)ΔP = Refrigerator price difference ($)C = Periodic payment for ΔP ($)

Fig. 9. Situations of payment considered.

Table 7Internal Rate of Return for cash purchase of more efficient refrigerators.


Class Standard (%) South region (%) Standard (%) South region (%)

A and B 39.20 15.30 57.20 24.10A–C 39.10 15.30 57.10 24.00A–D 41.90 16.70 61.12 25.90


or C) is greater than the useful life of the equipment, estimatedin 16 years.

Recently [21] have evaluated the economic and energy impactof efficient refrigerators introduction in Ghana, foreseeing annualgains of 550 kWh or US$ 35 when new appliances replace olderand inefficient ones. For the Brazilian national plan of refrigeratorssubstitution, put forward recently, is estimated an economy of260 kWh per refrigerator substituted [22]. The current study ex-plores a different context, when the costumer buys new appliancesand can select or not a most efficient refrigerator. In this case, for arepresentative situation (Southeast region, 300 L refrigerator,household consuming more than 200 kWh/month), an efficientrefrigerator (class A) will save annually 81 kWh or about US$19.60 (US$ 1.00 = R$ 2.00), in comparison with a less efficientequipment (class B). A more detailed discussion of these resultswill be presented in the next topic.

6. Sensitivity analysis of economic feasibility

In order to evaluate the sensitivity of economic feasibility ofbuying refrigerators with PROCEL label, an analysis is presentedbelow, taking into account the energy tariff, operational condition(standard and south region) and purchase situation (cash or cred-it). Again as adopted in the previous evaluation, just one-doorrefrigerators with internal volume of 300 L were considered.

The influence of energy tariff is presented in Fig. 10, indicatingthat for any tariff greater than 0.10 R$/kWh the consumers haveeconomic gains in cash purchase of efficient refrigerators operatingin standard conditions. For credit purchase, when the final cost ishigher compared with cash purchase, the consumers are benefitedonly with an energy tariff greater than 0.19 R$/kWh, as indicated inFig. 11, where in shown the MARR line assumed.

In a similar analysis, considering the operation at south regioncondition, the consumers were benefited if the energy tariff isgreater than 0.17 R$/kWh for cash purchase or 0.38 R$/kWh forcredit purchase, as indicate in Figs. 12 and 13, respectively.


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0.1 0.15 0.2 0.25 0.3

Tariff (R$/kWh)

Inte

rnal

Rat

e of

Ret

urn

- IR

R

A-B A-C A-D

Fig. 10. Impact of energy tariff in IRR for cash purchase – standard condition.

-2%

2%

6%

10%

14%

18%

0.10 0.15 0.20 0.25 0.30

Tariff ( R$/kWh)

Inte

rn R

ate

of R

etur

n - I

RR

A-B A-C A-D

0.19

6.7%

Fig. 11. Impact of energy tariff in IRR for credit purchase – standard condition.

-5%

0%

5%

10%

15%

20%

0.1 0.15 0.2 0.25 0.3

Tariff (R$/kWh)

Inte

rnal

Rat

e of

Ret

urn

- IR

R

A-B A-C A-D

0.17

6.7%

Fig. 12. Impact of energy tariff in IRR for cash purchase – south region.


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Please cite this article in press as: Cardoso RB et al. Economic feasibility for acquisition of efficient refrigerators in Brazil. Appl Energy (2009), doi:10.1016/j.apenergy.2009.05.025

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

0.2 0.25 0.3 0.35 0.4 0.45 0.5

Tariff (R$/kWh)

Inte

rn R

ate

of R

etur

n - I

RR

A-B A-C A-D

0.38

6.7%

Fig. 13. Impact of energy tariff in IRR for credit purchase – south region.


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It is interesting to compare these thresholds with the values ofcurrent residential tariffs in Brazil, as presented in Table 3. As ex-pected, the results of sensitivity analysis confirm the relevance offinancial costs and operational conditions and the significance ofactual energy tariff in the feasibility of buying more efficientrefrigerators.

One aspect not included in this analysis is the possible correla-tion between energy efficiency and other positive attributes ofrefrigerators, as general quality and durability. In this case, theinterest in energy economy will be reinforced by those benefits.Another aspect worth to be studied is the impact of increasing de-mand of more efficient refrigerators on their price, due to economyof scale and a consequent reduction in production and tradingcosts per unit. Unfortunately, there are no data available regardingprice elasticity for these appliances, as required for this evaluation.

7. Conclusions

According to the results and information gathered in the actualBrazilian market, as well as considering the residential tariffs andthe energy consumption estimated for two ambient temperatures,it was possible to conclude that, in general, the Brazilian consumeris economically benefited when buying more efficient refrigerators,which means equipment with PROCEL Label. The economic advan-tage is more evident for high-electricity tariff and hotter ambientconditions, as observed in most Brazilian regions. Otherwise, forlow-tariff consumers in the south region, the attractiveness is mar-ginal and other economic boundary conditions, such as interestrate applied in the financed purchase, can define the eventualadvantage in buying more efficient refrigerators. In the currentfinancing conditions, for this group of consumers, it is clearly notattractive to buy by credit more efficient refrigerator.

As an important conclusion of the paper, the higher efficiency ofan appliance is not enough to economically justify their adoption,because the level of use, ambient aspect (ambient temperature),equipment price and cost of energy play a decisive role. Thus, indespite of energy saving promoted by more efficient refrigeratorsin regards to conventional ones, as indicated in the labeling pro-gram evaluation, the economic attractiveness of buying thoseequipment depends on other factors, such as operational andfinancing conditions. As a general remark, taking into accountthe relevance of promoting energy efficiency in a national sense,


it is worth to assess and foster energy policy mechanisms able toreduce these economic barriers and improve the attractiveness ofmore efficient appliances.

As an example, recently the Brazilian government sets a na-tional program for replacing old refrigerators by new and efficientones in low income households, aiming to replace 10 million appli-ances in a 10 years period, with an expected annual energy savingof 14 TWh, associated to 7 million tons of CO2 and recycling 5 mil-lion ton of CFC gases [23]. Similar programs can be considered forother developing countries, where the potential of energy conser-vation is largely untapped.

References

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[15] Melo CA, Jannuzzi GM. Mechanisms to promote energy efficiency: refrigeratorreplacement in Brazil. In: 9th IAEE European conference. Florence; 2007.

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[23] MMA. National Program on Climate Change. Interministerial Committee onClimate Change. Brasilia; 2008.


http://www.aneel.gov.br/area.cfm?idArea=493

http://www.aneel.gov.br/area.cfm?idArea=493

http://www.cptec.inpe.br

http://www.ibge.gov.br

Economic feasibility for acquisition of efficient refrigerators in Brazil

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