One with the most effective ways for property managers and engineers to improve the force efficiency of the building's envelope would be to install window film. Window film makes glass more cost effective, with a far more affordable cost than new windows or any other glazing improvements. Of course, there exists a wide array of energy efficiency improvements to select from, sets from photovoltaic solar power systems to building insulation. One with the best ways, from the financial perspective, to gauge a selected energy saving technology is usually to determine the payback period. The estimated payback calculation is a wonderful decision making tool for evaluating competing energy saving technologies. It's pretty basic - indicating how fast the cash spent be returned. How to calculate payback There are several ways to calculate the payback of your energy improvements, starting from the simple as much as the relatively complex. The primary difference is bewteen barefoot and shoes are the assumptions integrated into the calculations. Adding assumptions and variables helps to make the calculations more advanced, but sometimes is critical to obtain an exact estimate. The two most useful approaches to determine the payback period... 1. Simple Payback 2. Cash Flow Analysis Both methods supply a reasonable estimate of the payback without getting overly complex Simple Payback Analysis The primary good thing about simple payback analysis is that it is simple while still providing useful information. To calculate the easy payback, simply divide the cost with the improvement through the estimated savings to yield the payback period. For example, in the event you spend $500 to set up energy saving measures that save $150/year the payback is a little over 36 months, $500/$150 = 3.33. Energy savings following this period is pure profit. Of course, this leaves out a great deal of variables that may impact the specific realized savings. Variables like maintenance costs, energy cost increases and inflation usually are not considered, nevertheless the method gets the benefit from being quick, easy and simple to understand. Cash Flow Analysis Cash flow analysis is the next step up when it comes to complexity. Taking more variables under consideration, things like maintenance, energy cost increases and inflation, earnings analysis provides truer picture from the payback, particularly when these prices are high. This type of analysis is the most suitable finished with a spreadsheet program to simplify the calculations. To determine payback using income analysis the original cost with the improvement is combined with estimated maintenance costs, including a bid associated with a increased costs on the expected life of the improvement along with with an estimate of their time cost increases in the same period. For example, in examining the price linked to replacing an HVAC system using a newer, more energy efficient system, employing a simple payback would not suffice, as HVAC systems involve regular maintenance that is needed to guarantee the life from the system. Because maintenance is critical, and at the mercy of cost increases with time, this has to be factored in the payback calculation to provide a genuine picture of the potential savings, or lack thereof. Now let's look at an illustration using window film, an electricity efficiency improvement with without any maintenance costs related to it. Assume a window film installation requiring an investment of $385,000 that realizes yearly savings of $168,000. With a simple payback corresponding to 2.29 many without any maintenance costs you can find hardly any that will noticeably impact the payback period. Energy costs raises within the life of the window film, but these will often slow up the payback period because savings realized is going to be in excess of the first estimate. As far as maintenance can be involved, window film doesn't require any, but over its lifetime some replacement will be needed because of damaged window film and for upgrades linked to tenant improvements. The cost of these replacements must not exceed 0.5% - 1% of the total volume of windows in the building. Again, the impact on this on the realized savings is negligible. Here's a story which will illustrate the practicality of employing these ways to figure out the payback period versus other, more complicated methods. A bag of gold was placed on a table in the room. blog , an engineer plus a scientist, were advised to get in the room and try to obtain the gold. The only rule was that all time they moved towards the gold, they can only traveling half the rest of the distance between themselves and the gold. The scientist made a decision to leave, declaring "in the event you can only approach half the space remaining you'll never make it. It's impossible." The engineer about the other hand simply took two steps, said, "Close enough for an engineering approximation," grabbed the gold and was gone. Payback calculations are much much like the example inside story. You can make a growing number of refinements and assumptions but within the end most in the time you'll be able to determine a workable payback using the easy payback method, which may be done on the back of your envelope. If you can however, and particularly when you will find large variable costs, make use of the cashflow analysis approach to element in some costs. The Conclusion We live in a very world of financial budgeting, requiring solid financial reasoning to make a selected investment, and we all need to make some rudimentary calculations to make sure were smart about how exactly we spend our money. For maximum efficiency and effectiveness the main focus must be on investments offering a quick payback, which could usually be determined adequately with the simple payback method or, when maintenance pricing is high, using the slightly more advanced cash flow analysis. Both methods are helpful tools for the energy manager.