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Energy Education Science and Technology Part A: Energy Science and Research
2010 Volume (issue) 26(1): 1-11

An approach to estimate
the life-cycle cost of energy efficiency
improvement of room air conditioners
T. M. I. Mahlia1, R. Saidur1,*, M. Husnawan1,2, H. H. Masjuki1,
M. A. Kalam1

1
Department of Mechanical Engineering, University of Malaya, 50603, Kuala Lumpur, Malaysia
2
Department of Mechanical Engineering, University of Syiah Kuala Jl. S. Abd. Rauf No.7, Darussalam-Banda
Aceh, NAD, Indonesia

Received: 05 December 2009; accepted: 28 December 2009

Abstract

This paper presents an approach to calculate life-cycle cost analysis of energy efficiency
improvement of room air conditioners. The least efficient model from a survey in the market is
selected for sample calculation. The method includes the selection of a set of design options that
increase efficiency, life cycle cost (LCC) analysis and payback period. LCC is analyzed as a function
of seven design options and five variables, namely discount rate, fuel price, appliance lifetime,
incremental cost and potential efficiency improvement. The study found that, certain level of
efficiency improvement can be achieved, if manufacturers willing to adopt more efficient design
options with a little additional investment for the product. Furthermore, the method can be used for
other appliances without any major modification.

Keywords: Life cycle cost; Engineering/Economics analysis; Energy efficiency ratio; Room air
conditioner; Cost benefit; Energy efficiency standard
©Sila Science. All Rights Reserved.

____________
*
Corresponding author. Tel.: +60-3-7967-4462; fax: +60-3-7967-5317.
E-mail address: saidur@um.edu.my, saidur912@yahoo.com (R. Saidur).
2 T. M. I. Mahlia et al. / EEST Part A: Energy Science and Research 26 (2010) 1-11

Nomenclature
BEC Baseline energy consumption (Wh)
ES Energy Savings (Wh)
EER Energy Efficiency Ratio, (Btu/Wh)
DEC Energy consumption of new design option (Wh)
LCC Life cycle cost, (RM$)
N Life time of the appliance, (year)
OC Annual operating cost, (RM$)
OH Operating hour
PAY Payback period, (year)
PC Purchase Cost, (RM$)
PF Price of fuel or electricity (RM$)
PI Power input (Watt)
PWF Present worth factor
r Discount rate, (%)
t Time (year)

1. Introduction

Energy efficiency standards and labels for household appliances are presently formulated
in many countries. The program is usually set based on input and advice from industry, R&D
organization and university expert on the importance of appliance energy efficiency (EE)
improvement in the market. Experiences in the US proved that the manufacturers have to be
motivated to adopt advanced technologies in order to meet tough new energy efficiency
standards established by the US Department of Energy.
There are two categories of design options for calculating energy efficiency improvement.
The first is a set of design that reflects existing and emerging technological options that are
available in the market. The second consists of design options that will require additional
research and development. However, only selected existing proven technology improvement
and their cost impact that are potential to be implemented for the product are considered in
this study.
The design options are usually used to calculate potential energy savings in correlation
with energy efficiency improvement and to determine LCC for that particular savings value.
Design options indicate technical feasibility of achieving the optimum level of efficiency.
This has been used for setting energy conservation standard in the US [1]. The methodology
for calculating life cycle cost analysis presented in this paper can be used for other appliances
and applications without major modification. Literature on energy efficiency standards and
labels are widely available. However, very limited articles discussed the method to calculate
life-cycle cost analysis of potential energy efficiency improvement. Energy efficiency is
defined as the percentage of energy generated by a heat source that is converted into usable
heat [2, 3].
In this study, a room air conditioner has been selected as a case study and the methodology
for calculating energy efficiency improvement is presented. Further energy efficiency
improvement is determined based on information provided by manufacturers, survey data, and
the technical committee for performance of household and electrical appliance of Malaysia.
 T. M. I. Mahlia et al. / EEST Part A: Energy Science and Research 26 (2010) 1-11 3

2. Survey data

Survey data inputs for calculation are necessary in order to use this method. These data
include baseline model, electricity price, discount rate, operation hour, potential design option
improvement etc. The design options are the changes to the design of the baseline model that
will improve the energy efficiency of the product. The baseline model selected is the least
efficient model in the market based on survey data of 324 models of room air conditioners in
Malaysia. The potential improved design options are determined based on available
technology in the market, input from manufacturers and available literatures. Some of the
design options are already included in the existing products and others are being developed.
The estimated room air conditioner efficiency gains with potential improved design option are
given by Ref. [4]. The list of potential energy efficiency improvement based on design option
are shown in Table 1, and baseline input data are presented in Table 2 [5-9].

Table 1. Potential design options for energy efficiency improvement

No Type of Design Options
1a Increase in frontal coil area (15%)
1b Increase in frontal coil area (30%)
1c Increase in frontal coil area (45%)
2a Additional refrigerant tube (1 extra row)
2b Additional refrigerant tube (2 extra rows)
3a Increased fin density (10%)
3b Increased fin density (20%)
4 Add sub cooler to condenser coil
5 Improved fin design
6 Improved tube design
7a Use high efficiency fan motor
7b Use electronically commutated motor
8a Improved compressor efficiency (5%)
8b Improved compressor efficiency (10%)
8c Improved compressor efficiency (15%)
9 Use of refrigerant R-410a
10 Use variable speed compressors
11 Use electronic expansion valves
12 Use advance controls

3. Methodology

The life-cycle cost and the engineering/economic analysis have carried out to analyze
potential efficiency improvement of new design options that are already adopted by existing
models in the market or some other combinations of design that are more efficient. The steps
for conducting this analysis include (i) identification of the manufacturing process of the
product, (ii) selection of baseline units, (iii) selection of design options, (iv) efficiency
improvement of each design option, (v) efficiency improvements of combined design options,
(vi) cost for each design option (vii) cost-efficiency curves, and (viii) energy savings potential
[2, 10]. Each step will be discussed in the following sections.
4 T. M. I. Mahlia et al. / EEST Part A: Energy Science and Research 26 (2010) 1-11

Table 2. The baseline input data

Description Value
Electricity price RM 0.235/kWh
Discount rate 7%
Appliance lifespan 12 years
Baseline energy consumption 7830 kWh/year
Cooling capacity 22700 (Btu/h)
Baseline EER 7.32
Energy Efficiency Standards EER 10.00
Appliance lifespan 12 (years)
Average operation hour 2525 (h/year)
Note: 1US $ ≈ RM3.20

3. 1. Manufacturing process of the product

Before conducting energy efficiency improvement, the process assembly of appliance is

identified to understand the manufacturing process of the appliance in order to calculate its
potential efficiency improvement. This part is necessary to identify the component of the
product which can be improved by the manufacturer since some of components of the
appliance are produced and supplied by vendors or by other manufacturers.

3. 2. Selection of baseline units

The baseline unit of appliance serves to provide basic design features for this analysis. For
products without any standards, a baseline models are the ones that has efficiency equal to the
minimum or the average of the existing models in the market. Selecting the least efficient
model as the baseline is recommended since this permits analysis at all possible levels of
efficiency, starting from the least efficient model [2, 11]. Therefore, the least efficient model
from the market is selected as a baseline for this analysis.

3. 3. Selection of design options

Design options are the changes to the design of the baseline model that would increase its
energy efficiency. The potential design options selected depend on the substitution of more
efficient components to the baseline product. The data of potential design improvement is
collected from manufacturers of the baseline unit which is least efficient model.

3. 4. Efficiency improvement of each design option

Efficiency improvement of each design option is determined by calculating potential

improvement of components substitution to the baseline models for improving energy
performance. The design options are usually selected based on inputs from manufacturer of
the baseline models and other possible improvements available in the market or from
references.
 T. M. I. Mahlia et al. / EEST Part A: Energy Science and Research 26 (2010) 1-11 5

3. 5. Efficiency improvements of combination design options

The combination of design options is the cumulative changes to the design that improve
energy efficiency of the baseline model. Calculations are conducted for various components
substitution to the baseline product in accordance with the inputs from manufacturers of the
baseline models and other available improvement from the market or from other references.
For combination of design options, energy savings, and efficiency improvement are
determined through cumulative improvement of each design option.

3. 6. Cost estimation for each design option

The increase of cost for each design option is the cost of producing products with the
improved design options. The expected cost of manufacturing each additional design option is
obtained from manufacturer. When manufacturer costs are unavailable, the costs are estimated
based on retail price, or from the designs option that already exists in market.

3. 7. Life-cycle cost

A life cycle cost (LCC) analysis calculates the cost of a system or product over its entire
life span. For this study LCC is used to calculate the cost of energy efficiency improvement of
the appliance based on each design option, and combination of design options of the product.
The LCC is the sum of investment cost and the annual operating cost discounted over the
lifetime of the product. LCC is calculated by the following equation [12]:

N
OCt
LCC = PC + ∑ (1 - r )
1
t
(1)

If operating expenses are constant over time, the LCC is simplified to the following
equations:

LCC = PC + (PWF) (OC) (2)

3. 8. Operating cost

To calculate LCC, the operating cost for the baseline unit should be identified. The
operating cost (OC) of appliance is a function of the annual energy use and electricity price.
Annual energy use is determined by multiplying the electrical power input, the annual hours
of operation and price of fuel or electricity which is given by the following equation:

OC = PI × OH × PF (3)

3. 9. Present worth factor

Present worth factor (PWF) is the value by which future cash flow to be received in order
to obtain the current present value. The present worth factor can be calculated by the
following equation:
6 T. M. I. Mahlia et al. / EEST Part A: Energy Science and Research 26 (2010) 1-11

N
1 1  1 
PWF = ∑ = 1 - N 
(4)
1 (1 + r ) t r  (1 + r ) 

3. 10. Payback period

The payback period (PAY) measures the amount of time needed to recover the additional
investment (increment cost) on efficiency improvement through lower operating costs. PAY is
found by solving the following equation:

PAY
∆PC + ∑ ∆OCt = 0 (5)
1

In general, PAY is found by interpolating between the two years when the above
expression changes sign. If the OC is constant, the equation has the following solution:

∆PC
PAY = − (6)
∆OC

The PAY is the ratio of the incremental cost (from the baseline to the more efficient
product) to the decrease in annual operating cost. If PAY is greater than the lifetime of the
product, it means that the increased purchase price is not recovered in reduced operating cost.

3. 11. Energy savings

The unit energy savings associated with each design option is the baseline energy
consumption minus the energy consumption of the appliance with each or cumulative design
options that is related to efficiency improvement of the product. It can be expressed using the
following mathematical equation:

ES = BEC – DEC (7)

4. Results and discussion

Most of appliance manufacturers rely on a combination of automated and manual

processes in the manufacturing flow. For room air conditioners, the cabinets and heat
exchangers are usually produced in-house. Other components such as compressor, fan motor,
fans and controller are supplied by vendors. The room air conditioner manufacturing flow
diagram is presented in Fig. 1 [1].
The operating cost of room air conditioner is a function of the annual energy use and
electricity price. Annual energy use is determined by multiplying the electrical input with the
annual hours of operation of compressor (note that the compressor operation is usually in
on/off mode) and accessories (fans etc) which can be calculated by the following equation:

CC × OH × PF
OC = (8)
EER × 1000
 T. M. I. Mahlia et al. / EEST Part A: Energy Science and Research 26 (2010) 1-11 7

Manufacturers of various room

air conditioners components
Supplied by vendors
Compressor, fans, valves,
controls

Heat Sub-
Exchanger Assembly
Construction production

Cabinet Heat Component

Construc- exchanger Assembly Testing Packaging
tion installation

Made by room air conditioner manufacturer

Fig. 1. Manufacturing flow diagram of room air conditioners.

The energy savings associated with each design options is the baseline energy
consumption minus the energy consumption of the appliance with each design option that is
related to EER improvement of the product. The mathematical expression of the ES can be
written as follows:

 CC × OH 
ES = BEC −  (9)
 EER × 1000 

The other data required for this analysis are, potential efficiency improvement and its
additional cost. Room air conditioner uses EER or COP to calculate its performance and in
this study, EER has been selected. Some of the data are collected from manufacturers and
some others are estimated based on a baseline unit and the result has been presented in Table
2.
From the analysis of the data presented in Table 1 it is observed that significant EER
improvement can be achieved by room air conditioners if manufacturers are willing to adopt
more efficient design options. The calculation shows that, even the least efficient models in
the market can reach the minimum energy efficiency standards proposed by US Department
of Energy which is at EER 10.00. This can be achieved by having improved fin design, tube
design and addition of extra rows of refrigerant tube (design options 1 to 3), while the
incremental cost is only about ± 8.6%. The analysis shows that the investment is quite low
8 T. M. I. Mahlia et al. / EEST Part A: Energy Science and Research 26 (2010) 1-11

Table 3. Selected Design options, potential EER improvement and additional cost
Design Technological Improvements Increase in Increase in Price
Options EER (%) (%)
0 Baseline design 0 0.0
5 0+Improved fin design 11 0.4
6 1+Improve tube design 8 0.8
2b 2+Add of refrigerant tube (2 extra rows) 16 7.4
10 3+Use variable speed compressors 12 9.7
1b 4+Increase in frontal coil area (30%) 8 9.6
8c 5+Improve compressor efficiency (15%) 8 11.5
9 6+Use of R-410A 5 20.6

comparing to EER improvement. However, in the future, the use of refrigerant R-410a as a
replacement for ozone depleting refrigerant should be considered as the main priority due to
environmental consciousness in some countries. The impact of design changes on room air
conditioner price and EER are presented in Fig. 2

3000

2800

6+Use of R-410a
3+Use variable speed
compressors
2+Add of refrigerant tube
(2 extra rows)

2600
Appliace Prices (RM)

1+Improve tube design

0+Improved fin design

2400
efficiency (15%)
5+Improve compressor
Baseline design

4+Increase in frontal

2200
coil area (30%)

2000

1800

1600
6,50 7,50 8,50 9,50 10,50 11,50 12,50 13,50 14,50
EER (Btu/Wh)

Fig. 2. Impact of design options changes on appliance price and EER.

The calculation results of cumulative payback period, life cycle cost and potential energy
savings for typical room air conditioner is tabulated in Table 4 and presented in Fig. 3.
Fig. 3 shows that the potential EER improvement for room air conditioner can reach a
maximum, which is at 13.96 if all seven design options are adopted. However, the additional
cost for the least four design options is quite high, which is about 50% of the baseline cost.
 T. M. I. Mahlia et al. / EEST Part A: Energy Science and Research 26 (2010) 1-11 9

Table 4. Life-cycle cost and payback periods

No Design options EER Price OC LCC PAY ES
Imp. Imp. (RM) (RM) (RM) (Year) (kWh)

0 Baseline design 7.32 1790 1840 16405 0.00 776

1 0+Improved fin design 8.13 1797 1658 14964 0.04 1298
2 1+Improved tube design 8.78 1811 1535 14003 0.07 2199
3 2+Add of refrigerant tube (2 extra rows) 10.18 1944 1323 12454 0.30 2802
4 3+Use variable speed compressors 11.40 2118 1181 11502 0.50 3175
5 4+Increase in frontal coil area (30%) 12.31 2289 1094 10978 0.67 3520
6 5+Improve compressor efficiency (15%) 13.30 2495 1013 10541 0.85 3725
7 6+Use of refrigerant R-410a 13.96 2864 965 10526 1.23 7830

18000 1.60

1.23
17000 16405 1.40
LCC
16000 PAY 1.20
Life Cycle Cost (RM)

Payback Period (Yrs)

14964
0.85
15000 1.00
14003
0.67

14000 0.80
0.50

13000 12454 0.60

12000 11502 0.40

10978
0.07

10541 10526
0.30
0.04

11000 0.20
0.00

10000 0.00
7.32 8.13 8.78 10.18 11.40 12.31 13.30 13.96
EER (Btu/Wh)

Fig. 3. Payback period and life cycle cost.

5. Conclusions

In this paper a methodology for calculating life-cycle cost of energy efficiency

improvement is presented. This method is very useful as a reference to calculate potential
energy efficiency improvement of the product which is correlated with its investment cost.
For the case of room air conditioner it can be concluded that a significant improvement could
be achieved if manufacturers in this country are willing to adopt more efficient design
options. The calculation found that even the least efficient model in the market can still reach
double digit EER by improving fin design, tube design and addition of extra rows of
refrigerant tube (design options 1 to 3). The study also found that the investments are quite
low comparing to energy efficiency improvement. Through this design option improvement,
hopefully the product can pass the tough energy efficiency standard set by developed
countries. Finally, as the world largest exporter of room air conditioners, Malaysia should be
10 T. M. I. Mahlia et al. / EEST Part A: Energy Science and Research 26 (2010) 1-11

one of the front-runner for more efficient room air conditioners and therefore, manufacturer
should be encouraged to adopt cost-effective of more efficient design options. Finally, it is
expected that this piece of work gives an idea of how to calculate life-cycle cost of energy
efficiency improvement of the product by adopting more efficient design option to improve
the product toward more energy efficient and environmental friendly to capture the market.
Even though the paper only investigates room air conditioner as a case study, the method is
also applicable for other appliances without any major modification [13-24].

Acknowledgements

The authors would like to acknowledge for the Institute of Research Management and
Consultancy, University of Malaya for the financial support under Grant No: FR088/2007A.

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