Window Film Energy Savings - Calculating Payback Periods
One in the most effective methods of property managers and engineers to further improve the vitality efficiency of an building's envelope is usually to install window film. Window film makes glass more cost effective, in a far more affordable cost than new windows and other glazing improvements.
Of course, there's a wide array of energy efficiency improvements from which to choose, from photovoltaic solar energy systems to building insulation. One of the best ways, from the financial perspective, to guage a particular energy saving technology would be to determine the payback period.
navigate here estimated payback calculation is an excellent selection tool for evaluating competing energy saving technologies. It's pretty basic - indicating how rapid the cash spent be returned.
How to calculate payback
There are a couple of methods to calculate the payback of their time improvements, starting from the simple around the relatively complex. The primary difference is together will be the assumptions integrated into the calculations. Adding assumptions and variables helps make the calculations more complicated, but sometimes is critical to get a definative estimate. The two most useful methods to determine the payback period...
1. Simple Payback
2. Cash Flow Analysis
Both methods supply a reasonable estimate in the payback without getting overly complex
Simple Payback Analysis
The primary benefit for simple payback analysis is that it is easy while still providing useful information. To calculate the simple payback, simply divide the cost with the improvement through the estimated savings to yield the payback period. For example, should you spend $500 to put in 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 great deal of variables that could impact the particular realized savings. Variables like maintenance costs, energy cost increases and inflation are certainly not considered, however the method contains the advantage of being quick, easy and simple to understand.
Cash Flow Analysis
Cash flow analysis is the next step up regarding complexity. Taking more variables under consideration, things such as maintenance, energy cost increases and inflation, cash flow analysis offers a truer picture from the payback, especially when these costs are high. This type of analysis is most beneficial carried out with a spreadsheet program to simplify the calculations.
To determine payback using income analysis your initial cost of the improvement is with the estimated maintenance costs, including a quotation of any increased costs in the expected life with the improvement in addition to with an estimate of your energy cost increases within the same period.
For example, in examining the price linked to replacing an HVAC system with a newer, more energy efficient system, using a simple payback wouldn't normally suffice, as HVAC systems involve regular maintenance that is needed to ensure the life with the system. Because maintenance is critical, and subject to cost increases over time, this needs to be factored in the payback calculation to give an authentic picture of the potential savings, or lack thereof.
Now here are a good example using window film, a power efficiency improvement with virtually no maintenance costs related to it. Assume a window film installation requiring a smart investment of $385,000 that realizes yearly savings of $168,000. With a simple payback corresponding to 2.29 a number of almost no maintenance costs you'll find hardly any that will noticeably impact the payback period. Energy costs increases within the life with the window film, however these will have a tendency to slow up the payback period because savings realized is going to be greater than the original estimate.
As far as maintenance is involved, window film doesn't require any, but over its lifetime some replacement will likely be needed as a consequence of damaged window film as well as upgrades associated with tenant improvements. The price of these replacements must not exceed 0.5% - 1% with the total volume of windows inside a building. Again, the impact with this around the realized savings is negligible.
Here's a tale which will illustrate the practicality utilizing both of these ways to determine the payback period versus other, more complicated methods.
A bag of gold was positioned on a table in a very room. Two people, an engineer plus a scientist, were advised to go in the room and try to acquire the gold. The only rule was that every time they moved towards the gold, they can only traveling half the rest of the distance between themselves as well as the gold. The scientist decided to leave, declaring "in case you can only approach half the distance remaining you will never make it. It's impossible." The engineer around the other hand simply took two steps, said, "Close enough to have an engineering approximation," grabbed the gold and was gone.
Payback calculations are much like the example in the story. You can make a growing number of refinements and assumptions but within the end most with the time you are able to determine a workable payback using the straightforward payback method, which can be done around the back of the envelope. If you can however, and especially when you will find large variable costs, use the cashflow analysis strategy to factor in some costs.
The Conclusion
We live in a very world of financial constraints, requiring solid financial reasoning to make a certain investment, and then we intend to make some fundamental calculations to make sure were smart about how precisely we spend our money. For maximum efficiency and effectiveness the main focus needs to be on investments offering a fast payback, that may usually be determined adequately with the easy payback method or, when maintenance costs are high, using the slightly more complicated income analysis. Both methods are helpful tools for the energy manager.