Obtaining the optimal fuel conserving investment mix: A linear programming approach

Abstract

This paper addresses the economic efficiency of fuel consumption reducing investments in residential heating. A linear programming model selects the optimal investment mix which minimizes the cost of maintaining a base house at 20°C over 10, 20 and 50-year planning horizons. Investments in increased amounts of south glass and mass, increased levels of wall, ceiling, basement, floor joist and window header insulation, and reduced air changes per hour are considered. The programming solution from the 50-year model indicates the investment mix which minimizes the total lifetime cost of heating the house. The 10 and 20 year planning horizon models provide shadow prices which reveal the opportunity costs resulting from suboptimal planning horizons. The results obtained permit important energy policy implications to be drawn. The effects of length of planning horizons and increased fuel prices on policy choices are considered. Also, the impacts of variations in allowable insulation investment, tax credits and solar investment tax credits are examined.