We know that there are some inefficient things in our home that might need replacing, but there’s always that question about whether it’s worth the cost. Refrigerators are one of the appliances in the home that use the most electricity. Older refrigerators, especially, can be very inefficient and a real drain on your wallet, even if their seal is not leaking or their condenser coils haven’t been cleaned since the fridge was purchased. But how do you know when it is time to replace your old fridge with a new one? Calculating a payback period for a new purchase like this is a great way to see the cost-benefit.
According to Energy Star, a refrigerator that is 15 years or older can use twice as much energy as a new Energy Star refrigerator. So would it make financial sense to replace your old clunker refrigerator that’s costing you extra money with a new Energy Star one that will save you money in the long run? Let’s find out.
Calculating the Payback Period of a New Fridge
To start off, we will need to look for the brand and model number of your refrigerator. The label with this information is usually inside the refrigerator above the top shelf or freezer if the freezer is on top. It should look something like this:
The brand for this refrigerator is Magic Chef and the model number is CTB1521ARW. Next, to find out how much energy your refrigerator uses you can visit http://homeenergy.org/show/article/nav/refrigerators/id/1706. You’ll be then prompted to input the Appliance Type, Appliance Brand, and Model Number. (Refrigerator refers to a split refrigerator and freezer. Freezers refer to standalone units that only have freezer compartments.)
When you press “Start Search” another window will open giving the model number, manufacture year, size, style, defrost type, energy rating, and adjusted energy rating.
From the table, we now know that the refrigerator is 19 years old since it was manufactured in 1997. The adjusted energy rating is the most important number as it shows us a current estimate of how much energy the unit is using after 19 years. At first, 19 years ago, the refrigerator was using 570 kilowatt-hours per year. The energy usage now has increased by 57 kilowatt-hours to 627. So how much is this costing you? (We’ll have to do some math…) If you don’t know how much you’re paying per kilowatt-hour for electricity, you can visit the US Energy Information Administration’s website.
For residential use where I live in Hawaii, the cost per kilowatt-hour is 26.87 cents:
By multiplying the adjusted energy usage, 627, by the cost per kilowatt-hour, $0.2687, we can determine the cost of running the refrigerator every year, about $168.50. With this in mind, you can do some refrigerator shopping on any home improvement website. To get the most bang for your buck and the greatest amount of energy savings, always buy an Energy Star certified appliance. This certification was created by the Environmental Protection Agency in 1992 to help “identify and promote energy efficiency in products, homes, and buildings nationwide.” During your search you’ll want to find a refrigerator similar in size to your current one or a bigger one if your heart desires.
During my search on Home Depot’s website I found a Frigidaire 16.3 cu. Ft. Top Freezer, which is slightly bigger than the Magic Chef example. I can see that it is Energy Star certified and costs $584.10.
If you are unsure whether or not an appliance is Energy Star certified, you can scroll down on the page to view the Warranty/Certifications table. Scrolling down to the refrigerator details also gives us the energy consumption in kilowatt-hours per year, 348 kWh.
Time for some math again. If this new Energy Star refrigerator uses 348 kilowatt-hours per year then we know it will cost about $93.50 to operate (348 x $0.2687). That’s an immediate savings of $74 per year ($168.50 – $93.59)! Knowing this, we can determine the payback period for your investment by dividing the cost of the new refrigerator, $584.10, by the yearly savings, $74, or about 8 years. According to US News Finance, the average refrigerator lasts about 13 years so this would be an acceptable payback period.
Payback periods can be shortened if energy prices increase or if utilities offer rebates or incentives to upgrade old refrigerators. Rebates and incentives can be found on the energy star website. For example, in Hawaii, a ratepayer-funded energy conservation and efficiency program called Hawaii Energy, will give homeowners a $100 rebate for purchasing a new Energy Star refrigerator. They will also ensure your old refrigerator is recycled too! We can now incorporate this rebate into the payback period by subtracting $100 from the cost of the new refrigerator, giving us $484.10. Dividing our new cost by our savings ($484.10/$74) will result in a new payback period of about 6.5 years!