During summer, air conditioning represents the largest electricity expense in most residential and commercial buildings. However, in spite of its high cost, air conditioning is necessary in many cases - for instance, you cannot expect a crowded office to be productive on a hot summer day without space cooling.

Based on upfront costs only, you may be inclined to purchase a window-type air conditioner instead of a more modern ductless system. The installed cost of a 12,000 BTU/h (1 ton) window unit can be less than $1,000, while a ductless unit of equivalent capacity normally exceeds $2,000. However, when you consider the long-term ownership cost, window-type air conditioners are more expensive by far.


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Window VS Ductless Air Conditioners: A Simple Example

Assume a property management company is in charge of a multifamily building with 50 window-type air conditioners, and an upgrade to ductless systems is being considered. The proposed upgrade has a SEER (Seasonal Energy Efficiency Ratio) of 28 and the installed cost is $2,500 per unit. A $125,000 investment in air conditioning upgrades may seem daunting, but the long-term benefit is much higher.

Although the exact calculation procedure is more complex, you can estimate the power consumption of an AC unit based on its nameplate cooling capacity and SEER. You just have to divide both values as shown below:

  • Power consumption (watts) = 12,000 BTU/h ÷ 28 = 429 W
  • Total consumption for all 50 units = 50 x 429W = 21,450 W = 21.45 kW

On the other hand, a window-type AC of this cooling capacity can easily exceed 1,500 watts of power consumption. Therefore, we can assume the building total is 75,000 W (75 kW). In other words, power consumption is reduced by over 70% with the efficient mini-split systems.

If air conditioning is used for 2,000 hours each year, and the electricity tariff is 25 cents per kWh, the yearly operating cost for each option would be the following:

AC Type

Hours / Year

Power Used

Energy Used

Yearly Expense

Window

2,000

21.45 kW

42,900 kWh

$10,725

Mini-split

2,000

75 kW

150,000 kWh

$37,500

In this example, the use of ductless air conditioners provides yearly savings of $26,775, and the upfront investment of $125,000 is recovered in less than five years. However, this is before considering the rebates available through the Con Edison incentive program.

Con Edison customers who upgrade to ductless air conditioners can get a rebate of up to $200 per unit if the building is commercial, and up to $600 per unit in residential settings.

  • The potential rebate is $30,000 in this example with 50 air conditioners, which results in a net project cost of $95,000.
  • The payback period is reduced from 4.7 years to 3.5 years.

Two Scenarios: Doing Nothing or Upgrading?

To illustrate how yearly savings add up with an air conditioning upgrade, we will consider two scenarios: doing nothing or “business as usual”, and upgrading the 50 window-type ACs to more efficient mini-split units.

Option

Investment

Yearly Expense

10-Year Expense

Total

Keep window ACs

None

$37,500

$375,000

$375,000

Mini-split upgrade

$95,000

$10,725

$107,250

$202,250

With the existing air conditioners, the corresponding expense over the next 10 years is $375,000. However, by upgrading to mini-split systems, the expense is reduced to $202,250. In other words, doing nothing is 85% more expensive than upgrading!

What Happens If the Building Is a New Construction?

In a new construction, the business case for mini-split systems is even better. Their cost only represents an incremental price over what you would pay anyway for the 50 window-type units.

  • Assuming $1,000 for each window air conditioner, the total cost is $50,000. This is an unavoidable expense, since you need at least basic air conditioning.
  • Paying $95,000 for more efficient AC units represents an extra $45,000 beyond the project baseline.
  • Investing an extra $45,000 to save $26,775 per year yields a payback period of 1.7 years.

An air conditioning upgrade is an cost-effective energy efficiency measure in an existing building, but the financial performance is even better for a new construction, where the less efficient option also has an upfront cost.

Final Recommendations

Energy-efficient air conditioning systems can deliver significant power bill savings, but only if they are used properly. For example, oversized and undersized cooling systems do not reach peak performance, so you should avoid “rules of thumb” when sizing equipment.

The best option is getting in touch with a qualified engineering company - they can perform a detailed property assessment and specify the AC equipment that yields the highest performance, while suggesting other promising energy efficiency measures.

 

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