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Payback

Question 1 Residential use of energy [6]

You are adding insulation to your geyser and first would like calculate the payback time. Your household is currently using 1200 units (kWh) per month at 40c/kWh. You estimate that the geyser contributes to 40 % of this bill.

The insulation addition would reduce the geyser's monthly energy demand by 12%. The insulation retrofit, including installation cost, is R500.
What is the payback period omitting the effect of inflation? Is it worth the effort to install the insulation?
What would the payback time be if the electricity prices increase to 50c/kWh?

SEE ATTACHED POWERPOINT FILE FOR HINTS

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Geyser monthly expense before insulation =

= 1200 kWh * 0.4 R/kWh * (40%/100%) = 192 R

The insulation would reduce it by

192 R * (12%/100%) = ...

Solution Summary

Payback is calculated. The solution is detailed and well presented. The response was given a rating of "5/5" by the student who originally posted the question.

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