Window Film Energy Savings – Calculation of Payback Periods
Website design By BotEap.comOne of the most effective ways for property managers and energy engineers to improve the energy efficiency of a building 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 upgrades.
Website design By BotEap.comOf course, there is a wide variety of energy efficiency upgrades to choose from, from solar photovoltaic 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.
Website design By BotEap.comCalculating the estimated recovery is an excellent decision-making tool when evaluating competing energy-saving technologies. It is quite basic: it indicates how quickly the money spent will be returned.
Website design By BotEap.comHow to calculate the refund
Website design By BotEap.comThere are several ways to calculate the payback of your energy upgrades, ranging from the simplest to the relatively complex. The main difference is that between them are the assumptions incorporated in the calculations. Adding assumptions and variables makes calculations more complex, but sometimes you need to get an accurate estimate. The two most useful ways to determine the payback period…
Website design By BotEap.com1. Simple refund
Website design By BotEap.com2. Cash flow analysis
Website design By BotEap.comBoth methods provide a reasonable estimate of recovery without becoming too complex.
Website design By BotEap.comSimple recovery analysis
Website design By BotEap.comThe main benefit of simple recovery analysis is that it is simple while providing useful information. To calculate simple payback, simply divide the cost of the upgrade by the estimated savings to get the payback period. For example, if you spend $500 to install energy saving measures that save $150/year, the payback is just over three years, $500/$150 = 3.33. The energy savings after this period is pure profit.
Website design By BotEap.comOf course, this leaves out many variables that can affect the actual savings realized. Variables such as maintenance costs, energy cost increases and inflation are not taken into account, but the method has the advantage of being quick, simple and easy to understand.
Website design By BotEap.comCash flow analysis
Website design By BotEap.comCash flow analysis is the next step in terms of complexity. Taking into account more variables, such as maintenance, energy cost increases, and inflation, cash flow analysis gives a truer picture of payback, especially when these costs are high. This type of analysis is best done with a spreadsheet program to simplify the calculations.
Website design By BotEap.comTo determine payback using cash flow analysis, the initial cost of the improvement is combined with estimated maintenance costs, including an estimate of any cost increases over the expected life of the improvement, as well as an estimate of energy cost increases during the same period.
Website design By BotEap.comFor example, when looking at the costs associated with replacing an HVAC system with a newer, more energy efficient system, using a simple rebate would not suffice, as HVAC systems involve regular maintenance that is needed to ensure the life of the system. of the system. Because maintenance is critical and subject to cost increases over time, this must be factored into the payback calculation to give a true picture of potential savings, or lack thereof.
Website design By BotEap.comNow let’s look at an example using window film, an energy efficiency improvement with virtually no associated maintenance costs. Assume a window film installation requires an investment of $385,000 and generates annual savings of $168,000. With a simple payback of 2.29 years and virtually no maintenance costs, very few things have a noticeable impact on your performance. the amortization period. Energy costs will increase over the life of the window film, but will tend to decrease the payback period as the savings realized will be greater than the initial estimate.
Website design By BotEap.comWhen it comes to maintenance, window film does not require any, but over its lifetime it will need to be replaced due to damaged window film and improvements associated with tenant improvements. The cost of these replacements should never exceed 0.5% – 1% of the total number of windows in a building. Again, the impact of this on the savings made is negligible.
Website design By BotEap.comHere is a story that will illustrate the practicality of using these two methods to calculate the payback period versus other more complex methods.
Website design By BotEap.comA bag of gold was placed on a table in a room. Two people, an engineer and a scientist, were told to go into the room and try to get the gold. The only rule was that each time they moved towards the gold, they could only go half the distance remaining between them and the gold. The scientist decided to leave, declaring “if you can only get as close as half the remaining distance, you’ll never get there. It’s impossible.” The engineer, on the other hand, just took two steps, said, “Close enough for an engineering approach,” took the gold and left.
Website design By BotEap.comThe recovery calculations are very similar to the example in the story. You can make more and more refinements and assumptions, but in the end, most of the time you can determine a viable recovery using the simple recovery method, which can be done on the back of an envelope. However, if you can, and especially when there are large variable costs, use the cash flow analysis method to account for some of these costs.
Website design By BotEap.comThe conclusion
Website design By BotEap.comWe live in a world of financial constraints, which requires sound financial reasoning to make a particular investment, so we need to do some basic math to make sure we spend our money wisely. For maximum efficiency and effectiveness, the focus should be on investments that offer a quick payback, which can usually be adequately determined using the simple payback method or, when maintenance costs are high, cash flow analysis. a bit more complex. Both methods are useful tools for the energy manager.