A model for the evaluation of energy conservation investments

Awareness of the need to conserve energy has increased in recent years. In Sweden the Government supports not only research in this field but also measures which can cut back on energy consumption. For instance, special subsidies and loans are granted with the aim of reducing energy usage in the building sector. In this article the problems of energy conservation in the building sector have been analyzed from an economical point of view.A model is constructed which shows how different factors affect the profitability of energy-saving investments. It is formulated as a dynamic control model in which the effect of energy-savings has been chosen as state variable and the investments made in energy conservation at a certain point of time as control variable. A sensitivity analysis is carried out to permit a discussion of how taxes, subventions, energy price trends and technological advances affect the solution obtained.The value of this article lies in its identification of a method for analyzing the impact of various factors on the profitability of energy-saving measures in the building sector.