• Latest
  • Trending
  • All

Window Film Energy Savings – Calculating Payback Periods

November 23, 2019
These inventory trackers will notify you when hard-to-find items are back in stock

These inventory trackers will notify you when hard-to-find items are back in stock

April 15, 2020
Antonov An-225 Mriya: world’s largest cargo plane, history, details

Antonov An-225 Mriya: world’s largest cargo plane, history, details

April 15, 2020
Copperstate Farms Launches International Cannabis Brand DNA Genetics in Arizona Market

Copperstate Farms Launches International Cannabis Brand DNA Genetics in Arizona Market

April 14, 2020
Mzee Moi’s Ksh10B Gift to Gideon

Mzee Moi’s Ksh10B Gift to Gideon

April 14, 2020
Covid Knights: Corporate social purpose in the time of COVID-19

Covid Knights: Corporate social purpose in the time of COVID-19

April 14, 2020
How Tesla And BMW Are Leading A Supply Chain Renaissance With Blockchain

How Tesla And BMW Are Leading A Supply Chain Renaissance With Blockchain

April 14, 2020
Last Mile Delivery Market Worth Observing Growth | UPS, FedEx, SF Express

Last Mile Delivery Market Worth Observing Growth | UPS, FedEx, SF Express

April 14, 2020
LATAM Cargo strengthens European cargo links

LATAM Cargo strengthens European cargo links

April 14, 2020
Ford making reusable hospital gowns from airbag materials as efforts against coronavirus expand

Ford making reusable hospital gowns from airbag materials as efforts against coronavirus expand

April 14, 2020
Don’t Sweat NBC’s Decision to Cut Back on Television Ad Inventory

Don’t Sweat NBC’s Decision to Cut Back on Television Ad Inventory

April 14, 2020
Software firms sharpen focus on AI, big data as IT spending drops

Software firms sharpen focus on AI, big data as IT spending drops

April 14, 2020
Navigating turbulent times in your supply chain (TL:DR version)

Navigating turbulent times in your supply chain (TL:DR version)

April 14, 2020
  • Supply Chain
  • Logistics
  • Warehousing
  • Procurement
  • Shipping
  • More
    • Strategic Sourcing
    • Spend Analysis
    • Inventory
    • Contact Us
No Result
View All Result
United States International Supply Chain Commission
United States International Supply Chain Commission
Home Spend Analysis

Window Film Energy Savings – Calculating Payback Periods

by usiscc
November 23, 2019
in Spend Analysis
0
491
SHARES
1.4k
VIEWS
Share on FacebookShare on Twitter

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 to choose from, 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 payback

There are several ways to calculate the payback of your energy improvements, ranging from the simple up to the relatively complex. The primary difference is between them are the assumptions incorporated into the calculations. Adding assumptions and variables makes the calculations more complex, but sometimes 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 still 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 taken into account, but the method has the advantage of being quick, simple and easy to understand.

Cash Flow Analysis

Cash flow analysis is the next step up in terms of complexity. Taking more variables into consideration, things like maintenance, energy cost increases and inflation, cash flow analysis gives a truer picture of the payback, especially when these costs are high. This type of analysis is best done with a spreadsheet program to simplify the calculations.

To determine payback using cash flow analysis the initial cost of the improvement is combined with the estimated maintenance costs, including an estimate of any increased costs over the expected life of the improvement as well as with an estimate of energy cost increases over the same period.

For example, in examining the costs associated with replacing an HVAC system with a newer, more energy efficient system, using a simple payback would not suffice, as HVAC systems involve regular maintenance that is needed to ensure the life of the system. Because maintenance is critical, and subject to cost increases over time, this needs to be factored into the payback calculation to give a true picture of the potential savings, or lack thereof.

Now let’s look at an example using window film, an energy efficiency improvement with virtually no maintenance costs associated with it. Assume a window film installation requiring an investment of $385,000 that realizes yearly savings of $168,000. With a simple payback equal to 2.29 years and virtually no maintenance costs there are very little that will noticeably impact the payback period. Energy costs will increase over the life of the window film, but these will tend to lessen the payback period as the savings realized will be greater than the initial estimate.

As far as maintenance is concerned, window film doesn’t require any, but over its lifetime some replacement will be needed because of damaged window film and for upgrades associated with tenant improvements. The cost of these replacements should never exceed 0.5% – 1% of the total amount of windows in a building. Again, the impact of this on the realized savings is negligible.

Here’s a story that will illustrate the practicality of using these two methods to figure out the payback period versus other, more complex methods.

A bag of gold was placed on a table in a room. Two people, an engineer and a scientist, were told to enter the room and to try to get the gold. The only rule was that every time they moved towards the gold, they could only traveling half the remaining distance between themselves and the gold. The scientist decided to leave, declaring “if you can only approach half the distance remaining you’ll never get there. It’s impossible.” The engineer on the other hand simply took two steps, said, “Close enough for an engineering approximation,” grabbed the gold and was gone.

Payback calculations are a lot like 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 workable payback using the simple payback method, which can be done on the back of an envelope. If you can however, and especially when there are large variable costs, use the cash flow analysis method to factor in some of these costs.

The Conclusion

We live in a world of financial constraints, requiring solid financial reasoning to make a particular investment, so we need to make some basic calculations to ensure were smart about how we spend our money. For maximum efficiency and effectiveness the focus should be on investments offering a quick payback, which can usually be determined adequately with the simple payback method or, when maintenance costs are high, with the slightly more complex cash flow analysis. Both methods are useful tools for the energy manager.

Share196Tweet123Share49
usiscc

usiscc

  • Trending
  • Comments
  • Latest
Antonov An-225 Mriya: world’s largest cargo plane, history, details

Antonov An-225 Mriya: world’s largest cargo plane, history, details

April 15, 2020
These inventory trackers will notify you when hard-to-find items are back in stock

These inventory trackers will notify you when hard-to-find items are back in stock

April 15, 2020
‘Significant opportunity’ in Asia as supply chain integrates, consolidates

‘Significant opportunity’ in Asia as supply chain integrates, consolidates

January 3, 2020
These inventory trackers will notify you when hard-to-find items are back in stock

These inventory trackers will notify you when hard-to-find items are back in stock

0
Global Industry Analysis, Size, Share, Growth, Trends, and Forecasts 2016–2024 – ZMR News Reports

Global Industry Analysis, Size, Share, Growth, Trends, and Forecasts 2016–2024 – ZMR News Reports

0
PHOTOS: Ottawa firefighters respond to warehouse fire

PHOTOS: Ottawa firefighters respond to warehouse fire

0
These inventory trackers will notify you when hard-to-find items are back in stock

These inventory trackers will notify you when hard-to-find items are back in stock

April 15, 2020
Antonov An-225 Mriya: world’s largest cargo plane, history, details

Antonov An-225 Mriya: world’s largest cargo plane, history, details

April 15, 2020
Copperstate Farms Launches International Cannabis Brand DNA Genetics in Arizona Market

Copperstate Farms Launches International Cannabis Brand DNA Genetics in Arizona Market

April 14, 2020
  • Privacy Policy
  • Terms of Use
  • Disclaimer
  • DMCA
  • Contact Us

Copyright © 2021 United States International Supply Chain Commission (usiscc.org)

No Result
View All Result
  • Supply Chain
  • Logistics
  • Warehousing
  • Procurement
  • Shipping
  • More
    • Strategic Sourcing
    • Spend Analysis
    • Inventory
    • Contact Us

Copyright © 2021 United States International Supply Chain Commission (usiscc.org)

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Cookie settingsACCEPT
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled

Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.

Non-necessary

Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.

SAVE & ACCEPT