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Introduction
There 3 major concepts in this analysis; Life-Cycle costing, rebound effect and payback period. Life-Cycle costing consists of fixed and variable costs during lifecycle.
Life-Cycle costing
Life-Cycle costing is the cost in a product's life cycle. There are many types of cost related to Life-Cycle costing such as Aquisition cost, Operation cost, Product distribution cost, Maintenance cost. All of these cost may not be related to a system. We only have to do cost analysis for certain area that is applicable to our system.
Rebound effect
The rebound effect is the effect caused by the improvement in technology which reduce the amount of energy saving. Generally, improvement in technology will reduce energy consumption. However, energy consumption was not saved as it is supposed due to the rebound effect.
Direct Rebound Effect
The effect directly caused by the technology improvement. Let's look at an example from Evans & Hunt (2009). If there is 20 percent improvement in fuel efficiency of passengers car, cost per kilometer of driving becomes cheaper, consumers may choose to drive further and more often. This increased the consumption of energy. So, energy consumption will not be reduced as much as it is supposed to be.
Indirect Rebound Effect
The effect indirectly caused by the improvement in technology. For the same example from Evans & Hunt (2009), as money saved on fuel consumption, people may spend money on other goods and services which will increase energy consumption. The direct and indirect rebound effect of this example is illustrated in figure 22.
Figure 22: Direct and indirect rebound effect of fuel efficiency on consumers (Evans & Hunt 2009)
Classification of rebound effect
The concept of rebound effect is illustrated in table 15. To explain this, when there is an improvement in technology, there is an estimate of energy savings for this particular improvement. However, in reality, there are 2 outcomes of this improvement namely "Actual energy savings" and "economy-wide rebound effect".
Economy-wide rebound effect is the sum of both direct and indirect rebound effect. The direct rebound effect of figure 22 example for consumers can be decomposed into substitution effect and income effect. Substitution effect means that consumption of cheaper energy service substitutes for consumption of other goods and services while maintaining a constant level of 'utility', or consumer satisfaction. Example, the money saved will be spent on other stuff which cause energy consumption. Income effect means that increase in real income achieved by energy efficiency improvement allows higher level of utility to be achieved by increasing consumption of all goods and services. Example, cheaper fuel price, further driving.
Indirect rebound effect can be decomposed into embodied energy (indirect energy consumption) and secondary effect. Indirect energy consumption appear to be used to produce equipment and tools to get that energy efficiency which cannot be avoidable. Secondary effect is the consequence of the improvement. Example, money saved in fuel will be spent on holiday in another country which require much more energy.
Note
The above example is analyzed for the consumers only. There is a producer perspective for this rebound effect which will not be explained in this portfolio.
Table 15: Summary of rebound effect (Evans & Hunt 2009)
Payback period
The payback period is the time taken for the investment to get back. Payback period trying to evaluate the trade off between time and money. For example, if we are travelling from Canberra to Sydeny and there are 3 options; bus, train and plane. If we want to reach Sydney in a very short time, we have to pay higher price but money is our concern, then we will take the cheapest option which has longer travelling time.
Application
For our library, there are 2 main area that we may want to accommodate more people. They are furniture and computers. We have to decide which one to buy more in the aspect of economic value. Table 16 below shows the life-cycle costing and payback period calculation for a choice between buying furniture or computers.
The cost listed in the table 16 is for 1 set of furniture and 1 set of PC. The acquisition cost is the cost buying a set of table and chair and a desktop PC with monitor screen. The price of table and chair is based on IKEA website. The price of computer is based on the Dell Australia website. There is operation cost for computer as it requires electricity to operate with 0.99 cents per day for supply based on ActewAGL business plan. So, it will be $361.35 per year if a library opens 7 days a week. There is software cost for computer as computer needs some basic software for work. In this case, we only consider the MS office professional suit for simplicity. In fact, All ANU computers have different types of software for every colleague. The product distribution cost here is estimated by looking through the delivery cost from IKEA website and gave the highest upper limit. The maintenance cost, test and support cost and training cost for computer are purely assumption. The supply support cost for computer is based on Dell Australia price for keyboard and mouse.
To calculate for the payback period, first we have to sum up the cost for furniture and computer. Then, calculate the difference between those 2 total cost. Then, the pay back period is calculated by using the equation, payback period (year) = initial investment($)/ net annual saving ($per year). So, it will be (75/4315.95)*365 = 6.34 (approximately about 7 days).
Table 16: life-cycle costing and payback period

ANU Research school of physics and engineering
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