Window Film Energy Savings - Calculating Payback Periods

 One of the most effective ways for property managers and energy engineers to improve the energy efficiency of a building's envelope is to install window film. Window film makes glass more energy efficient at a much more affordable cost than new windows or other glazing improvements.

Of course, there is a wide variety of energy efficiency improvements, everything from photovoltaic solar power systems to building insulation. One of the best ways, from a financial perspective, to evaluate a particular energy-saving technology is to determine the payback period.

The estimated payback calculation is an excellent decision-making tool for evaluating competing energy-saving technologies. It's pretty basic - indicating how fast the money spent be returned.


How to calculate the payback

There are several ways to calculate the payback of your energy improvements, ranging from the simple to the relatively complex. The primary difference between them is the assumptions incorporated into the calculations. Adding assumptions and variables makes the calculations more complex, but sometimes it is necessary to get an accurate estimate. The two most useful ways to determine the payback period...

1. Simple Payback

2. Cash Flow Analysis

Both methods provide a reasonable estimate of the payback without getting overly complex.


Simple Payback Analysis

The primary benefit of simple payback analysis is that it is simple while providing useful information. To calculate the simple payback, simply divide the cost of the improvement by the estimated savings to yield the payback period. For example, if you spend $500 to install energy-saving measures that save $150/year, the payback is a little over three years, $500/$150 = 3.33. Energy savings after this period is pure profit.

Of course, this leaves out a lot of variables that can impact the actual realized savings. Variables like maintenance costs, energy cost increases, and inflation are not considered, but the method has the advantage of being quick, simple, and easy to understand.



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