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vatin_ni@spbstu.ru
Cost Effectiveness of the Smart Home
System in Civil Engineering
Olga Gamayunova, Andina Sprince and Daria Morozova
Abstract Modern buildings are faced with ever-increasing demands for energy
savings, comfort and safety. The constant increase in electricity and heat tariffs
forces us to look for new technologies that conserve resources, use materials with
high thermal insulation, etc. In recent years, systems capable of creating comfort,
ensuring safety and also saving the consumption of electricity, water and gas have
become increasingly popular. One of such systems is the Smart Home intelligent
technology which can automatically coordinate seamlessly control all kinds of engi-
neering devices and the building as a whole. Installing Smart Home systems and
technologies, specialists focus mainly on saving money. The article describes the
basic configuration of the Smart Home system, on the basis of which the economic
efficiency of the installation of this system is determined using basic economic indi-
cators. The calculation results showed that the Smart Home system for an apartment
of 73.6 m2will pay off in six years.
Keywords Smart Home ·Economic effectiveness ·Energy saving ·Investments
expenses ·Payback period ·Discount rate
1 Introduction
Modern buildings are faced with ever-increasing demands of energy savings, comfort
and safety. The constant increase in electricity and heat tariffs forces to look for
new technologies that conserve energy resources, use materials with high thermal
insulation, etc. [1,2].
Recently, technical solutions known as the “Smart Home” have become increas-
ingly popular. The Smart Home technology can automatically coordinate all kinds
of engineering devices and the building as a whole automatically.
O. Gamayunova (B)·D. Morozova
Peter the Great St. Petersburg Polytechnic University, Polytechnicheskaya 29, St. Petersburg,
Russia 195251
e-mail: gamayunova@inbox.ru
A. Sprince
Riga Technical University, Riga, Latvia
© Springer Nature Switzerland AG 2020
B. Anatolijs et al. (eds.), Proceedings of EECE 2019, Lecture Notes
in Civil Engineering 70, https://doi.org/10.1007/978- 3-030- 42351-3_19
221
vatin_ni@spbstu.ru
222 O. Gamayunova et al.
The main stages of the development of the Smart Home system, a general descrip-
tion of the architecture and functional modules of the Smart Home intelligent system,
are devoted to a fairly large number of publications by authors such as N. N. Bont-
sevich, S. J. Darby, K. Gram-Hanssen, S. J. Darby, B. Eggen, E. van den Hoven, J.
Terken, V. Ivanov, S. V. Krasnov, S. A. Krasnova [3–10].
The introduction of “Smart Home” technologies on the market is based on the
fact that potential users receive clear benefits with an acceptable level of risk. C.
Wilson, T. Hargreaves, R. Hauxwell-Baldwin, A. Jacobsson, M. Boldt, B. Carlsson,
A. V. Moroz, A. D. Bondareva, E. N. Sozinova, D. A. Zakoldaev, M. Zhakish, etc.,
studied security problems and the risks of using Smart Home technology [11–17].
Due to the increase in population and economic growth in general, global energy
demand will increase significantly in the coming years. Most of the energy demand
comes from the use of energy in buildings. The evaluation of investments in energy-
saving measures, materials and technologies is devoted to the work of authors such
as A. S. Gorshkov, N. I. Vatin, D. V. Nemova, P. P. Rymkevich, O. O. Kydrevich, A.
Y. Ivanov, Y. L. Rutman, S. A. Chernogorskiy, K. V. Shvetsov [18–22].
The requirement for energy efficiency in buildings is considered one of the most
important goals for ensuring global energy sustainability. This problem has prompted
recent research into the development of Smart Home energy management systems
based on sensors that analyze how energy is consumed in buildings. The studies of
various strategies for using smart appliances to reduce electricity consumption in
residential buildings and improve energy efficiency are the subject of the work of P.
P. Moletsane, T. J. Motlhamme, R. Malekian, D. C. Bogatmoska, B. Zhou, W. Li, K.
W. Chan, Y. Cao, Y. Kuang, X. Liu, X. Wang, R. Ford, M. Pritoni, A. Sanguinetti,
B. Karlin, etc. [23–25].
The decision to introduce the Smart Home system is usually made based on an
assessment of future cash savings. The research on the demand for Smart Home
systems and the economic feasibility of their implementation is reflected in the
works of S. V. Pupentsova, N. S. Alekseeva, J. Shin, D. Lee, S. Franzo, F. Frattini, V.
M. Latilla, M. Longo, F. C. Sangogboye, O. Droegehorn, J. Porras, C. Nasulea, M.
R. Moroianu, V. Gluhov, V. Leventsov, A. Radaev, N. Nikolaevskiy, etc. [26–31].
2 Materials and Methods
The development of the main measures for the implementation of the Smart Home
system will be on the example of a two-room apartment with an area of 73.6 m2
(Fig. 1).
First, we calculate the amount of monthly communal payments. Initial data:
method of calculation based on tariffs; apartment with water supply, sewage, electric
stove; building with elevator (Table 1).
vatin_ni@spbstu.ru
Cost Effectiveness of the Smart Home System in Civil Engineering 223
Fig. 1 2D apartment plan
Tabl e 1 Monthly payment for housing services
Type of service Rate Consumption rate (per 1 person) Amount, rub.
Cold water supply 31.58 rub/m35.193 m3491.99
Hot water supply 105.92 rub/m33.687 m31171.58
Water disposal 31.58 rub/m38.88 m3841.29
Heating 1765.33 rub/Gcal 0.0188 Gcal/m22442.65
Energy consumption 3.48 rub/(k Wh) 88 k Wh 918.72
Total per month 5866.23
Total per year 70,394.76
The cost of equipment for installing the minimum (basic) Smart Home sys-
tem for a two-room apartment (lighting and backlight control, iOS/Android con-
trol, air-conditioning control, motion sensor, light sensor, control of water leaks) is
approximately 185 thousand rubles.
The average increase in the cost of housing and communal services over the past
seven years amounted to 12.5%. At the same time, the average savings after installing
the Smart Home system should be about 30–40%. Analysis of the effectiveness of
the Smart Home system is given in Table 2. All indicators are in rubles.
BasedonTable2, you can make a simplified table of source data (Table 3). For
the article “Income,” we take the savings on utility bills compared to before and after
installing the system. As an item “Expenses” is annual system maintenance (2500
rubles per year).
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224 O. Gamayunova et al.
Tabl e 2 Analysis of the effectiveness of the Smart Home system
Indicators 1 year 2 year 3 year 4 year 5 year 6 year 7 year
Before installing a Smart Home system
Utility
payments
−70,395 −79,194 −89,094 −100,230 −112,759 −126,854 −142,711
Contingency
costs
−8000 −8000 −8000 −8000 −8000 −8000 −8000
Cash flow −78,395 −87,194 −97,094 −108,230 −120,759 −134,854 −150,711
Accum. cash
flow
−78,395 −165,589 −262,683 −370,913 −491,673 −626,527 −777,238
After installing a Smart Home system
Installation
cost
−185,000
Utility
payments
−42,237 −47,517 −53,456 −60,138 −67,656 −76,112 −85,627
Contingency
costs
−5500 −5500 −5500 −5500 −5500 −5500 −5500
Cash flow −232,737 −53,017 −58,956 −65,638 −73,156 −81,612 −91,127
Savings or
consumption
−154,342 34,178 38,137 42,592 47,604 53,242 59,584
Accum. cash
flow
−154,342 −120,164 −82,027 −39,435 8169 61,411 120,995
In order to overestimate the value of future capital, a discount rate is currently
used. There are several ways to calculate the discount rate. Investments in the Smart
Home system are a project where it is difficult to statistically assess the magnitude of
the possible risk (profitability). Therefore, we will calculate the discount rate based
on risk premiums, i.e., as the sum of the risk-free interest rate, inflation and risk
premium:
r=rf+rp+I(1)
where
rdiscount rate;
rfrisk-free interest rate;
rprisk premium;
Iinflation rate
The discount rate formula consists of the sum of the risk-free interest rate, inflation
and risk premium. Inflation was highlighted as a separate parameter because the
depreciation of money is ongoing; this is one of the most important laws of the
functioning of the economy.
The risk-free interest rate (real discount rate) is calculated as the difference
between the nominal discount rate and expected inflation. Given that the Central
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Cost Effectiveness of the Smart Home System in Civil Engineering 225
Tabl e 3 Indicators of the investment project
Indicators 0 year 1 year 2 year 3 year 4 year 5 year 6 year 7 year Tot al
Income, rub. 20,099 34,178 38,137 42,592 47,604 53,242 59,584 295,436
Expenses, rub. −185,000 −2500 −2500 −2500 −2500 −2500 −2500 −2500 −17,500
Net cash flow, rub. 17,599 31,678 35,637 40,092 45,104 50,742 57,084 277,936
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226 O. Gamayunova et al.
Bank of the Russian Federation refinancing rate is now 7%, and the inflation forecast
for 2019 is 4.7%, the real discount rate is 2.3%.
Risk adjustments can be evaluated as a rule in certain ranges:
•Investments to intensify production: 3–5%
•Product sales increase: 8–10%
•The risk of market promotion of a new type of product: 13–15%
•Research and development costs: 18–20%.
In our case, we accept the risk adjustment of 3%. Given the fact that in the previous
year, the inflation rate was 4.2%, and the discount rate will be 9.5%.
Net present value (NPV) can be calculated as:
NPV =
T
t=0
NCFt
(1+r)t(2)
where
NCF net cash flow;
Rdiscount rate;
Tproject implementation period.
In our case, the net present value will be:
NPV =17,599
(1+0.095)1+31,678
(1+0.095)2+35,637
(1+0.095)3+40,092
(1+0.095)4
+45,104
(1+0.095)5+50,742
(1+0.095)6+57,084
(1+0.095)7−185,000
(1+0.095)0=851.91
The project is effective because NPV > 0.
Another indicator of the effectiveness of the investment is the profitability index
(PI):
PI =PV
IC =T
t=0
CFt
(1+r)t
IC (3)
where
PV total cash flow from the project;
CFtcash receipts in the period t(Cash flow);
Rdiscount rate;
IC invested capital;
Tproject implementation period.
In our case, the profitability index will be:
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Cost Effectiveness of the Smart Home System in Civil Engineering 227
PI =1
185,000 ·
⎛
⎜
⎜
⎝
17,599
(1+0.095)1+31,678
(1+0.095)2+35,637
(1+0.095)3+40,092
(1+0.095)4+
+45,104
(1+0.095)5+50,742
(1+0.095)6+57,084
(1+0.095)7
⎞
⎟
⎟
⎠
=1.0046
The project is effective because PI > 1.
The most popular indicator of evaluating the feasibility of investment is the pay-
back period of the investment project. In our case, we will determine discounted
payback period (DPP)—the period of the return of funds taking into account the
time value of money (discount rate).
The payback period of an investment project (the term for the return on the total
amount of investments) is the period of time from the start of the project for which
capital investments are covered by the total effects.
To determine the payback period (DPP), a formula is used where the time period
t is taken as unknown:
DPP =
T
t=1
CFt
(1+r)t≥I0(4)
where
CFtcash receipts in the period t(cash flow);
Rdiscount rate;
Tproject implementation period;
I0(IC) invested capital.
Define the payback period of investments in the Smart Home system.
As a rule, when there are several projects, choose the one whose payback period
is shorter. In our case, we evaluate a single project, so the payback period for a
project should not be more than the investment period. Investments will pay off in
the year when a positive economic effect is achieved. For our case, the calculation of
the payback period is given in Table 4. All indicators are in rubles. The calculation
of the payback period for investments in the Smart Home system showed that the
project will pay off in six years.
Tabl e 4 Calculation of the payback period for investments in the Smart Home system
Indicators 0 year 1 year 2 year 3 year 4 year 5 year 6 year 7 year
Invested
capital
−185,000
Discounted
cash flow
16,072 26,420 27,143 27,887 28,651 29,436 30,243
Net present
value
−168,928 −142,508 −115,365 −87,478 −58,827 −29,391 852
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228 O. Gamayunova et al.
3 Results and Discussion
In this paper, it is proposed to implement the Smart Home system for a two-room
apartment with an area of 73.6 m2. The complete set of the system is basic: lighting
and backlight control, control with iOS/Android, air-conditioning control, motion
sensor, light sensor, control of water leaks. The total cost of this basic configuration
is approximately 185 thousand rubles. The estimated payback period for investments
in this project will be six years, taking into account tariff increases of 12.5%.
Thus, based on all calculated economic indicators, it is mono to conclude that
the Smart Home system is an effective investment of money, which can significantly
reduce living expenses, as well as save on the operation and maintenance of various
engineering systems. At the same time, the comfort of living is significantly increased
and the time spent on managing all the features of an apartment or apartment building
is reduced.
4 Conclusion
For large-scale implementation of the Smart Home system, a prerequisite is a signif-
icant reduction in the cost of equipment and installation of system elements. Also,
competent specialists are required who are able to correctly develop the project, tak-
ing into account the slightest nuances of a residential building or premises in which
the introduction of technology is planned.
According to the manufacturers, the period of “moral aging” of the equipment
of the Smart Home system is 10–15 years (although the equipment can serve much
longer). And if the Smart Home system prevents unforeseen circumstances (flood,
fire, theft, etc.), then in this, case all costs will be paid off instantly.
The calculation results showed that the Smart Home system for an apartment
of 73.6 m2will pay off in six years, i.e., before the end of the standard equipment
life. After the payback period, this system switches to net money savings during the
operation period.
Based on the foregoing, we can conclude that the implementation of the Smart
Home system is a cost-effective solution when using the basic equipment and
installing it in a large apartment.
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