This paper offers
a method for incorporating fuel price elasticity
of demand into models assessing net present value and
payback time ofthermal refits. Based on modelling and
a case study,
it demonstrates how including year-on-year fuel price elasticity
of demand in calculations of economic viability of thermal refits
lengthens perceived payback time, reduces NPV of fuel saved, and
reduces the CO
2 saved as
a consequence of the refit measures, over
the lifetime of the energy efficiency measures. The degree and the
significance ofthis effect depend on the mathematical relationships
between variables and the choices of values for variables such as
the discount rate,the assumed pre-refit consumption level, and the
expected fuel price increase. The paper suggest five main findings
as to why considering fuel price elasticity in assessing the viability
of thermal refits is important: