Integrative economic framework incorporating the Emission Trading Scheme (ETS) for U.S. Residential energy systems

Abstract

• The use of renewable sources, such as geothermal (GSHP) and solar energy (PV-integrated systems), turned out to be highly beneficial in reducing building energy demand, operation cost, and GHG emissions. • However, these renewable systems do not guarantee short payback periods. The payback period of ground-source heat pump (GSHP) is relatively long (8.08 to 19.75 years) compared to its high energy efficiency. • For most of the HVAC systems covered in this study, the payback period reduction is between 1.50 and 2.00 years when applying the current ETS policy (California cap and trade). • ‘Emission Trading Scheme (ETS) can shorten the payback periods for all HVAC systems covered in this study. Meanwhile, ‘solar tax credit’ can only reduce the payback periods for PV-integrated systems. • The growing demand for ‘Emission Trading Scheme (ETS)’ will reduce the payback periods for many residential HVAC systems, especially by encouraging the greater use of renewable energy sources. Throughout the past few decades, the residential building sector has been responsible for an increasingly large share of primary energy demand (21.2%) in the United States (EIA, 2020). Such high building energy demand from the residential sector will eventually cause both economic and environmental problems. Therefore, this study provides an integrative framework for evaluating the economic value of multiple HVAC systems in the U.S. residential sector. Specifically, this study calculates the payback period for a number of building energy systems by applying two environmental policies, the ‘solar tax credit’ and the ‘Emission Trading Scheme (ETS)’. A two-story single residential building in Detroit, MI was examined using the TRNSYS software tool. The building systems were subdivided into passive (insulation level) and active (HVAC type) systems. The insulation levels were classified into three scenarios depending on their respective U-values (low, medium, and high). Similarly, the HVAC systems were classified into twelve different types: (1) furnace and window cooling unit (benchmark), (2) air-source heat pump and air-conditioner (ASHP + AC), (3) ground-source heat pump (GSHP), (4) variable refrigerant flow (VRF), (5) VRF integrated with PV (PV + VRF), and (6) VRF integrated with PV and battery (PV + ESS + VRF). Each system can be operated with or without a heat recovery system. The results clearly show that the ground-source heat pump (GSHP) and PV-integrated systems (PV + VRF) are far more efficient than other conventional systems in reducing building energy demand, operation cost and GHG emissions. However, in contrast to these findings, the study also shows that both renewable energy systems have relatively long payback periods (8.08 to 20.50 years) along with their high system efficiencies. This clearly demonstrates that evaluating the overall efficiencies of building energy systems without performing additional economic analysis can mislead the public about the notion of ‘building energy optimization’. This could lead to suboptimal decision-making, whereas using the proposed framework would enable economically and environmentally preferable choices. In addition, this study presents support for the widespread application of ETS to the U.S. residential buildings. The growing demand for ETS will reduce the payback periods for many residential HVAC systems, especially by encouraging the greater use of renewable energy sources. In conclusion, since the economic incentive provided by ETS rewards taking an integrative approach to reduce building energy demand, operation cost and GHG emissions, adopting this policy actively at the national level will guarantee not only economic benefits for individual building owners, but also positive environmental impacts for the entire society.